UC-NRLF 


B   M   SDl   ^^0 


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OF  THE 


University  of  California. 

OlFT    OF 

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Class 


STUDIES 


IN 


Practical  Life  Insurance 


An  Examixatiox  of  the  Pkinciim.hs  ok  Lifk  Insurance 

AS  Applied  in  the  Policies,  Reports,  Acenc^y. 

AND  Office  Methods  of  the 

Ne\y-York  Life  Insurance  Company 


BY 

JAMES   M.  HUDNyT:; 

ASSISTANT    SECRETARY    OF    THE    CplV^I^ANY 


With  a  Chapter  on  the  "Personal  and  Public  Aspects  of  Life  Insurance' 

BY  Darwin  P.  Kingsley,  President  of  the  Company 

and  an  Appendix  containing  the  most  important  Sections 

OF  the  Insurance  Law  of  New  York 


NEW    YORK 

PUBLISHED     BY     THE     COMPANY 

1911 


Copyright,  1911,  by  the 
NEW-YORK  LIFE   INSURANCE   CO. 


Si 


V 


le  to  other  publica- 
'— Semi-Centennial 
.895-1905;  "T.H." 
ng  the  Home  Office 


^ 
^ 


1  1 


22rvl01 


^"''t 


References  have  occasionally  been  made  to  other  publica- 
tions by  the  Company— thus :  "S.  C.  H." — Semi-Centeunial 
History  of  the  Company;  "H."— History,  1895-1905;  "T.  H." 
—  Temple  of  Humanity— a  volume  describing  the  Home  Office 
and  Home  Office  methods. 


22iVV}\ 


( ONTEN  TS 


Page 
1 

2 


CHAPTER  I. 

Three   Representative   Policies— Their   Conditions   and   Benefits. 

The  scope  of  these  studies 

Copy  of  Ordinary  Life  Policy  

The  tools  we  must  use 

The  death-rate  determines  the  cost I'J 

The  level  premium  is  best 

Finding  the  net  single  premium ^^ 

Finding  the  net  annual  premium •  • 1- 

Proving  our  figures   ^- 

Some  important  deductions    ^'^ 

The  loading  for  expenses,  taxes  and  contingencies 1^ 

The  Contract— its  integrity— its  good  faith la ' 

Contract  changes — of  Beneficiary — to  other  forms I*' 

Keeping  the  contract  in  force ^  • 

The  contract  as  a  bank  credit 1^ 

Loan  and  surrender  values — surrender  charge 1^ 

Computing  paid-up  insurance  values   

The  surrender  charge  examined 

Paying  death-losses — equivalent  values    

Twenty  Instalments  certain  and  Annuity  23 

Value  of  the  instalment  option 24 

How  dividends  may  be  used -'^ 

Limited-Payment  Life  Policy   25 

Copy  of  Twenty-Payment  Life  Policy 26 

The  premium  and  the  loading ^^ 

Verifying  the  reserves "^ 

Effect  of  the  larger  reserves ^^ 

Twenty-Year  Endowment  Policy    ^^ 

Computing  the  premium'  for  insurance  ^^ 

Computing  the  premium  for  endowment   ^ ' 

Copy  of  Twenty-Year  Endowment  Policy  ^^ 

Table  of  loan  and  surrender  values '*^ 

Summary  of  the  discussion '*'' 

CHAPTER  n. 
Apportionment  of  Surplus. 

Legal  requirements    

Limitation  of  expenses ^^ 

5U 


Assumed  mortality  gains  

Select  and  ultimate  method  of  valuation ^1 

Ascertaining  the  expense  rate ^^ 

Ascertaining  the  interest  rate 


No  dividend  earned  in  first  yeai 


56 


This  result  foreseen   ^ ' 


Ascertaining  the  dividend  earned  in  second  year 

vii 


59 


viii  Contents 

CHAPTER  III. 

Reports  and  Examinations. 

Page 

Outline  of  annual  report 61 

Income  and  disbursements 62 

Items  treated  in  an  exceptional  way 63 

Expenses  imposed  by  law 64 

Assets — valuation  of  bonds,  etc 65 

Liabilities — valuation  of  policies,  etc 67 

Reports  to  other  States 68 

Reports  to  foreign  governments 70 

CHAPTER  IV. 

Agency  Organization  and  Methods. 

The  Branch  Office  system 73 

Advantages  of  the  Branch  Office  system 74 

The  Nylic  Association 75 

The  elimination  of  waste 75 

Insurance  Clubs 76 

The  Weekly  "Bulletin" 77 

CHAPTER  V. 

Home  Office  Organization  and  IMethods. 

Control  by  Policy-holders  through  Trustees 78 

'Control  by  Trustees  through  Committees 78 

I  Departments  and  Divisions  in  Home  Office 79 

Itinerary  of  an  application  for  insurance 79 

How  the  money  comes  in 81 

Itinerary  of  a  death-claim 82 

Payment  of  Endowments  and  Annuities 83 

Other  disbursements  85 

CHAPTER  VI. 

Personal  and  Public  Aspects  of  Life  Insurance  by  the  President 
of  the  Company. 

A  few  of  the  things  Life  Insurance  does 86 

The  ultimate  meaning  of  Life  Insurance  86 

A  new  declaration  of  independence  89 

Life  Insurance  and  the  man  90 

Life  Insurance — the  discoverer  and  the  lawgiver 93 

Life  Insurance — Its  service  and  leadership  95 

Taxation  of  Life  Insurance 97 

The  kingdom  and  the  riches  of  Life  Insurance 99 

The  relation  of  the  State  to  Life  Insurance 102 

A  plea  for  Federal  Supervision  of  Interstate  Life  Insurance 103 

AI'PKXDIX. 

Compound  interest  tables   106 

Compound  discount  tables  107 

Table  showing  the  necessity  and  the  sufficiency  of  the  net  premium 108 


Contents  ix 

Page 

Net  effective  rates  of  interest.  1908 109 

Assessment  of  expenses,  1908   HI 

Taxes  paid  by  the  New-York  Life  Insurance  Company  in  1910 112 

From  the  "Insurance  Law"  of  New  York — 

§    6.  Fees    H^ 

S    7.  Expenses  of  examinations 115 

§  16.  Investment  of  capital  and  surplus 115 

§  18.  Stocks,  bonds  and  other  evidences  of  debt 116 

§  20.  Restrictions  as  to  real  property   116 

S  36.  Officers  and  directors  not  to  be  pecuniarily  interested  in  transactions    117 

§  39.  Examiners  and  examinations   117 

§  44.  Reports  of  corporations   H"? 

§  45.  Forms  of  report  to  be  furnished  by  Superintendent US 

S  50.  Agents'  certificate  of  authority  US 

S  53.  General  penalties   118^ 

§  58.  Policy  to  contain  the  entire  contract;  statements  of  insured  to  be  representa- 
tions and  not  warranties H^ 

§  59.  Certain  provisions  in  policies  prohibited 118 

§  60.  Estimates  and  misrepresentations  prohibited 119 

§  83.  Distribution  of  surplus  to  policy-holders 119 

§  84.  Valuation  of  policies  120 


Contingency  reserve 


120 


§  88.  Surrender  value  of  lapsed  or  forfeited  policies 121 

§  89.  Discriminations  prohibited 122 

§  91.  Business  to  be  accepted  from  licensed  agents  only;  agents'  certificate    of    au- 
thority      123 

§  92.  No  forfeiture  of  policy  without  notice 123 

S  94.  Election  of  directors   124 

§  96.  Limitation  of  new  business  127 

§  97.  Limitation  of  expenses  128 

S  98.  Salaries  of  officers  and  agents;  when  fixed  by  board  of  directors 129 

§  99.  Vouchers     129 

§  100.  Investments    129 

§  101.  Standard  Provisions  of  life  policies 130 

§  103.  Annual  reports  of  life  insurance  corporations 131 

From  the  Legislative  Law — 

S  66.  Legislative  appearances  ::\:.'.'.  HW.'.'.'.liy.'.'.:.: 132 

From  the  Penal  Law — 

§  665.  Misconduct  of  directors,  officers,  agents  and  employees  of  corporations    133 

§  1200.  Rebates    133 

§  1627.  Contradictory  statements  under  oath 133 

From  the  Tax  Law — 

§  187.  Franchise  tax  on  insurance  corporations  133 

From  the  Insurance  Law  of  Massachusetts — 

§  75.  Standard  provisions  of  life  policies 134 

Postscript    135 

Items  from  New-York  Life's  Annual  Report  for  1908 136 

Items  from  New-York  Life's  Annual  Report  for  1910 142 


STUDIES  IN 
PllACTK  AL   LIFE    INSURANCE 


CHAPTER  I. 


TIlllEE    REPRESENTATIVE   POLICIES-THEIR 
(  ONDITIONS  AND  BENEFITS 

The  Scope  of  These  Studies. 

^^IIERE  are  plenty  of  text-books  on  life  insurance  and  we  do  not  intend  to 
add  to  their  number.  On  its  theoretical  side  the  subject  is  highly  tech- 
nical, and  involves  a  considerable  knowledge  of  the  higher  mathematics. 
Studied  in  the  abstract  it  is  apt  to  be  very  dry,  and  no  one  but  a  student,  bent 
upon  mastering  his  task,  is  likely  to  get  through  even  a  very  simple  text-book. 
Of  course  this  should  not  deter  students  who  have  the  time  and  inclination  from 
undertaking  the  task,  nor  should  it  prevent  the  addition  to  college  curricula  of 
.a  course  of  study  in  life  insurance. 

But  we  have  set  for  ourselves  and  our  readers  a  very  diil'erent  task.  Whilf 
a  few  people  need  to  understand  the  theory  and  practice  of  life  insurance  in  its 
•entirety,  a  very  large  number  need  to  have  such  a  knowledge  of  it  as  mil  enable 
them  to  insure  wisely,  to  use  intelligently  as  occasion  may  require  the  various 
options  which  the  Policy  contains,  and  to  understand  the  relations  which  life 
insurance  sustains  to  the  state.  When  one  understands  a  specific  case,  generali- 
zations become  comparatively  easy,  and  the  scientific  study  of  the  subject  be- 
•comes  more  attractive;  and  we  venture  to  hope  that  many  who  read  these 
"Studies"  will  be  led  to  pursue  the  study  of  life  insurance  on  broader  lines. 

General  Garfield  tells  us  how%  when  he  was  elected  a  member  of  the  Ohio 
Legislature,  he  attained  a  working  knowledge  of  the  government  of  the  State. 
He  reasoned  after  this  manner:  "Nothing  can  be  done  by  a  government  without 
money;  and  so  if  I  examine  all  the  legal  steps  by  which  taxes  are  assessed,  col- 
lected and  expended,  I  shall  know  a  good  deal  about  the  practical  workings  of 
the  government  of  the  State  of  Ohio."  We  propose  to  follow  some  such  plan  in 
the  present  work.  The  business  of  a  life  insurance  company  consists  very  largely 
in  issuing  policies  of  insurance  and  in  carrying  out  the  contracts  thus  made.  If, 
then,  we  take  up  a  few  representative  policies,  consider  all  their  clauses  and  follow 
them  through  all  possible  phases  of  their  history— showing  what  the  Company 
receives  on  account  of  them  and  what  it  does  with  the  money— we  shall  know 
something  practical  about  life  insurance.  Here,  then,  is  a  copy  of  the  Ordinary 
Life  Poliev  of  the  New- York  Life  Insurance  Company,  as  issued  in  1911 : 


studies  in  Practical  Life  Insurance 


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Studies  in  Practical  Life  Insurance 


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REGISTER  OF  CHANGE  OF  BENEFICIARY. 

1                                            NOTE.-N.  chuz<.  <l~l»~llon.  or  dKtar.l.oi.  .ball  uke  .Heel  unlll  cB<lof«<<  on  Ihit  Policy  b,  the  Cunpuy  •!  the  Hone  Ollk*.                                             1 

DATE  ENDORSED 

BENEFICIARY 

ENDORSED  BY 

studies  in  Practical  Life  Insurance  9 

Rather  a  formidable  document  isn't  it  ?  Well,  such  policies  used  to  be  much 
briefer,  and  as  we  go  on  to  examine  this  one  we  shall  find  that  the  reason  Avhy 
a  life  policy  now  contains  so  many  words  is  because  it  promises  so  much  — it 
provides  for  so  many  contingencies.  So  let  that  encourage  us  to  go  on  and 
examine  it  clause  by  clause.  In  a  palace  there  are  many  rooms,  and  all  have 
their  uses — it  is  only  the  hovel  that  is  so  simple  that  it  can  be  taken  in  at  a 
glance.* 

The  first  thing  to  be  noted  is  that  by  this  Policy  the  Company  promises  to 
pay  ten  thousand  dollars  on  the  receipt  of  proof  of  the  death  of  the  Insured, 
during  the  continuance  of  the  contract ;  that  it  takes  effect  as  of  July  1,  1911, 
after  the  delivery  of  the  Policy;  and  that  the  consideration  is  $281.10  cash  in 
hand,  and  the  same  amount  to  be  paid  on  the  first  day  of  July  in  every  year 
thereafter  during  the  continuance  of  the  Policy. 

Now  we  are  getting  doMoi  to  business — Jioiv  does  the  Company  know  that 
the  amount  named  as  consideration  ivill  enable  it  to  perform  its  part  of  the 
contract?  This  is  the  nub  of  the  whole  matter,  and  if  our  readers  will  follow 
us  carefully  here  they  will  begin  to  understand  both  the  theory  and  the  practice 
of  life  insurance. 

The  Tools  We  Must  Use. 

Perhaps  a  word  should  be  said  just  here  about  technical  terms.  They 
are  the  tools  we  must  work  wdth,  and  it  is  necessary  for  the  reader  to  under- 
stand them  and  fix  them  in  mind — just  as  he  does  the  technical  terms  in 
Arithmetic,  Grammar,  Algebra  or  Geometry.  It  will  be  noted,  for  example, 
that  the  contract  under  consideration  is  called  in  general  a  Policy,  specifically 
an  Ordinary  Life  Policy ;  that  the  money  paid  for  it  is  called  a  Premium ; 
that  the  person  whose  life  is  insured  is  called  the  Insured ;  and  the  person  to 
whom  the  Policy  is  payable  at  the  death  of  the  Insured  is  called  the  Bene- 
ficiary. These  terms  are  in  universal  use^^in  the  contract,  in  the  law,  in  the 
official  reports — and  all  have  exact  and  definite  meanings.  "We  shall  see  later 
that  there  are  various  kinds  of  Policies  and  Premiums;  it  is  sufficient  now  to 
know  that  the  Ordinary  Life  Policy  is  a  Policy  that  insures  during  the  entire 
life  and  upon  which  premiums  are  payable  annually,  semi-annually  or  quarterly 
during  life.  The  premium  here  named  is  the  gross,  or  office  premium — that 
is  the  premium  that  must  be  paid  to  the  Company.  We  shall  find  farther 
on  that  the  gross,  or  office  premium  consists  of  two  parts — the  "net  premium" 
for  the  payment  of  death-losses  and  the  "loading"  for  expenses,  taxes  and  con- 
tingencies. We  shall  find  that  there  is  a  net  annual  premium  and  a  net  single 
premium.  We  must  also  fix  in  mind  the  principles  of  interest  and  discount.  We 
shall  frequently  find  it  necessary  to  compute  the  present  value  of  money  to  be 
paid  at  some  future  time  or  times.  Every  time  a  new  term  is  used,  its  meaning 
should  be  fixed  in  mind  before  going  farther. 

*WhiIe  the  contract  is  long,  there  are  only  twenty-seven  written  words  and  twelve 
written  figures  in  it.  In  the  heading  to  the  "Table  of  Loan  and  Surrender  Values",  it  wiil 
be  noted  how  a  table  for  a  policy  of  $1,000  is  adjusted  to  a  policy  of  $10,000  by  the  addition  of 
two  written  words,  and  five  written  figures.  The  form  of  the  policy  is  the  result  of  much  study, 
so  that  the  writing  of  it  may  be  done  quickly  and  with  the  least  possible  chance  of  error.  The 
work  is  done  on  special  typewriters  at  an  average  cost  of  less  than  five  cents  per  policy. 


10  Studies  in  Practical  Life  Insurance 

The  Deatii-Rate  Determines  the  Cost. 

The  age  of  the  Insured  under  this  Policy  is  35  years.  Now,  we  know,  as 
a  matter  of  observation,  that  of  men  aged  35  some  die  soon  and  some  live  long, 
and  it  is  by  knowing  how  rapidly  a  large  number  of  men  aged  35  will  die  off 
that  the  Company  knows  how  it  can  afford  to  make  such  a  contract  as  this. 
This  knowledge  is  embodied  in  Tables  of  Mortality.  These  tables  show  the 
approximate  death  rate  at  each  age  among  a  large  number  of  persons.  A 
mortality  table  usually  begins  Avith  100,000  lives  at  age  10,  and  shows  the 
number  of  deaths  in  each  year  until  all  are  dead.*  It  is  evident  that  if  we 
know  what  the  death  rate  will  be  in  an}'  year  of  life  we  can  tell  what  it  Avill 
cost  to  insure  against  the  contingency  of  death  in  that  year.  For  example, 
if  among  81,822  persons  living  at  age  35,  732  will  die  during  the  next  year,  then 
the  average  risk  will  be  732  divided  by  81,822,  and  the  net  cost  of  insuring  each 
man  for  $1,000  will  be  this  fraction  multiplied  by  1,000.  In  the  same  way  the 
net  cost  of  insurance  in  each  year  of  life  may  be  obtained.  In  practice  the  "age" 
is  taken  at  the  nearest  birthday. 

The  Level  Premium  Is  Best. 

But  there  are  various  reasons  why  year-by-year  insurance  is  not  suitable 
for  human  life.  In  the  first  place,  the  risk  is  liable  to  deteriorate  very  rapidly, 
and  if  a  company  had  the  right  to  cancel  a  risk — as  in  fire  insurance — the  man 
who  was  about  to  die  might  find  himself  suddenly  without  insurance.  If,  on 
the  other  hand,  the  company  did  not  have  this  right,  the  impaired  risks  would 
all  renew  while  more  or  less  of  the  best  risks  would  not,  and  the  company 
would  experience  an  abnormal  death-rate.  Second,  year-by-year  insurance 
would  involve  a  yearly  increasing  cost  until,  in  old  age,  the  cost  would  become 
prohibitory.  The  safest,  most  satisfactory  and  most  successful  form  of  life 
insurance  is  that  which  insures  for  the  whole  life,  or  for  a  term  of  years,  and 
so  adjusts  the  cost  that  the  Insured  is  required  to  pay  the  same  amount  every 
year.t 

This  complicates  the  problem  of  ascertaining  what  is  a  proper  charge  for 
such  a  contract  as  the  foregoing.     We  see  at  once  that  if  the  Insured  is  to  pay 

♦The  story  of  the  formation  of  tables  of  mortality  is  a  long  one  and  can  not  be  gone  into 
here,  but  it  will  be  of  interest  to  note  that  the  discovery  of  the  law  of  mortality 
is  usually  attributed  to  Edmund  Halley,  Astronomer  Royal  of  England,  who  in  1692  constructed 
from  the  deatli  registers  of  the  City  of  Breslau,  in  Silesia,  the  first  complete  table  of  mor- 
tality. In  1815  Joshua  Milne  constructed  the  Carlisle  Table  from  the  records  of  the  City  of 
Carlisle,  England.  This  table  was  the  first  used  in  this  country.  In  1843  the  Actuaries',  or 
Combined  Experience,  Table  was  constructed  from  the  mortality  experience  of  17  English  life 
companies;  and  in  1867  the  American  Table  was  constructed  chiefly  from  the  experience  of  the 
Mutual  Life  Insurance  Company,  by  Sheppard  Homans,  then  Actuary  of  that  company.  (At 
the  American  Life  Underwriters'  Convention  of  1860.  Mr.  Homans  reported  that  vitality  statis- 
tics had  been  promised  by  22  companies  and  received  from  13.)  The  two  latter  are  those 
now  used  in  this  country.  Most  of  the  State  Insurance  Departments  use  tlie  Actuaries'  Table 
in  the  valuation  of  policy  liabilities,  but  the  tendency  of  late  has  been  toward  the  American 
Table. 

fOf  course,  we  do  not  overlook  the  various  attempts  which  have  been  made,  and  are  con- 
stantly being  made,  to  furnish  life  insurance  at  current  cost  by  co-operative,  and  fraternal, 
societies.  A  history  of  these  attempts  and  the  present  condition  of  these  societies  is  the  best 
comment  upon  the  statements  made  above.  Most  of  the  co-operative  societies  have  died  out. 
The  social  bond  has  made  the  fraternal  orders  more  enduring,  but  they  are  experiencing  the 
inevitable  increa.se  In  cost  which  threatens  their  extermination  or  the  freezing  out  of  the 
older  members. 


studies  in  Practical  Life  Insurance  11 

the  same  each  year,  he  will  pay  more  than  the  current  cost  during  the  early 
years  of  his  Policy  and  less  than  the  current  cost  during  its  later  years— if  he 
lives  to  old  age.  Consequently  there  will  be  an  accumulation  of  these  early  over- 
payments which  may  be  kept  at  interest,  and  the  amount  necessary  will  be 
aflt'ected  by  the  rate  of  interest  that  may  be  earned.  This  complicates  the  matter 
still  farther.  Now,  we  might  say— there  must  be  some  amount  which,  if  paid 
every  year  by  men  insuring  at  age  35,  and  the  early  overpayments  increased  by 
compound  interest,  Avould  be  exactly  sufficient  to  pay  each  man's  policy  as  it 
matured.  AVe  might  then  say  that  this  amount  according  to  the  American  Table 
of  Mortality  w^ith  interest  at  37c  is  $21.08  per  $1,000  insured,  and  that  this  is 
the  net  premium  used  in  the  foregoing  Policy,  and  that  the  balance,  $7.03  per 
$1,000,  is  the  "loading"  for  expenses,  taxes  and  contingencies. 

While  all  this  would  be  true,  it  would  not  be  quite  satisfactory— if  we  are 
going  to  make  any  pretence  of  Studying  Life  Insurance;  and  while  we  do  not 
propose  to  go  through  the  operation  of  calculating  the  net  premium,  we  think 
the  method  of  doing  it  may  be  so  outlined  that  the  ordinary  reader  will  grasp 
the  principles  upon  which  the  computation  proceeds.  This  can  be  done  without 
the  use  of  any  algebraic  formulae;  we  need  not  perform  the  long  arithmetical 
calculations;  all  that  is  necessary  is  to  follow  the  reasoning  and  accept  our  as- 
surances as  to  the  figures  which  would  result  if  the  calculations  were  performed. 

Finding  the  Net  Single  Premium. 

Let  us  assume,  then,  that  we  wish  to  insure  for  $1,000  each  as  many  men  as 
the  American  Table  of  Mortality  shows  to  be  living  at  age  35.  This  number  is 
81.822,  and  of  this  number  732  will  die  during  the  next  year.  Premising  that  in 
life  insurance  calculations  the  premiums  are  supposed  to  be  paid  at  the  begin- 
ning of  the  year  and  that  death-losses  are  supposed  to  be  paid  at  the  end  of  the 
year  in  which  they  occur,  our  first  operation  is  to  find  what  sum  in  hand  at  the 
beginning  of  the  year,  improved  by  3%  interest,  will  pay  $732,000  at  the  end  of 
the  year.  This  is  a  simple  operation  and  may  be  performed  by  dividing  $732,000 
by  $1.03,  or  by  multiplying  it  by  the  decimal  .970874.*  This  will  give  $710,- 
679.77,  and  this  is  the  present  vidue  of  $732,000  to  be  paid  one  year  hence.  This 
amount  in  hand  at  the  beginning  of  the  year  would  therefore  provide  for  the 
death-losses  of  the  first  year. 

At  the  beginning  of  the  second  year  there  are  81,090  living  and  the  number 
of  deaths  in  the  second  year  will  be  737.  There  Avill  therefore  be  $737,000  to  be 
paid  in  death-losses  at  the  end  of  the  second  year.  AVhat  amount  must  Ave  have 
in  hand  to  provide  for  that?  Obviously  such  an  amount  as  will  produce  $737,000 
if  kept  at  interest  for  two  years— in  other  words  the  present  value  of  $737,000 
due  two  years  hence.  Now  we  might  compute  the  amount  of  one  dollar  at  the 
end  of  two  years  with  interest  at  3%  and  use  that  as  a  divisor;  but  we  Avill  take 
a  shorter  cut.  Tables  of  compound  interest  and  discount  are  in  common  use, 
and  one  Avill  be  found  on  page  107.    They  have  been  made  to  lighten  our  labors. 


*Thls  decimal  is  the  present  value  of  $1  due  one  year  hence,  interest  being  computed  at 
3  per  cent.  It  is  obtained  by  dividing  $1  by  $1.03  the  amount  of  $1  at  the  end  of  one  year  with 
interest  at  3  per  cent.  By  adding  interest  at  3  per  cent,  to  $1.03  we  get  the  value  of  $1  at  the 
end  of  two  years,  and  by  using  this  as  a  divisor  we  get  the  present  value  of  $1  due  two  years 
hence.     AA'hen  we  understand  the  principle  we  may  use  the  table  on  page  107. 


12  Studies  in  Practical  Life  Insurance 

We  understand  them  and  could  make  one  ourselves  if  we  chose;  so  we  will  do  as 
Mr.  Emerson  said  he  did  when  he  went  from  Boston  to  Concord— he  used  the 
bridge  over  the  Charles  River,  instead  of  swimming  the  river.  By  these  tables 
the  present  value  of  one  dollar  to  be  paid  two  years  hence  is,  interest  being 
assumed  at  3%,  $0.942596;  the  present  value  of  $737,000  due  two  years  hence 
will  therefore  be  the  product  of  this  sum  multiplied  by  this  fraction,  or  $694,- 
693.25.  We  have  now  found  the  present  value  of  the  death-claims  to  be  paid  at 
the  end  of  the  first  and  second  years;  we  might  perform  similar  operations  for 
all  the  following  years  until  the  last  survivor  dies  at  age  96.  Having  done  that 
and  added  together  all  the  results  we  would  have  the  present  values  of  all  the 
death-claims  to  be  paid  upon  81,822  persons  insuring  for  $1,000  each  at  age  35. 
If  we  should  do  this  we  would  get  as  a  result  $34,355,666.83,  an  average  of 
$419.88  and  a  fraction  for  each  person  insured.  This  latter  amount  is  called 
the  net  single  premium,  and  if  each  of  our  81,822  persons  were  to  pay  that 
amount  at  age  35,  and  the  Company  received  interest  on  accumulations  at  3% 
per  annum,  and  there  were  no  expenses,  it  would  be  able  to  pay  all  losses  at  the 
end  of  the  year  in  which  they  occurred. 

Finding  the  Net  Annual  Premium. 

But  no  one — or  hardly  any  one — wishes  to  pay  for  a  whole  life  insurance 
by  one  sum.  He  wants  to  pay  for  it  by  yearly  instalments ;  so  our  next  problem 
will  be  to  find  a  yearly  instalment  from  each  of  the  living  that  will  be  the 
equivalent  of  $419.88  cash  in  hand.  Of  course  we  know  it  will  require  more 
than  one  dollar  a  year — but  let  us  see  how  far  one  dollar  a  year  will  go 
tow^ards  it.  If  each  of  our  81,822  persons  pay  one  dollar  w^e  shall  have  $81,822 
to  start  with.  At  the  beginning  of  the  second  year  there  will  be  81,090  living, 
and  from  these  Ave  will  get  $81,090,  the  present  value  of  which  is  $78,728.17. 
At  the  beginning  of  the  third  year  there  will  be  80,353  living,  from  whom 
we  will  receive  $80,353,  the  present  value  of  which  is  $75,740.42.  In  like 
manner  we  may  find  the  present  values  of  one  dollar  paid  at  the  beginning  of 
each  year  by  the  living  until  all  are  dead.  When  we  have  found  these  amounts 
and  have  added  them  together  we  shall  have  a  total  of  $1,629,648.77,  which 
is  the  present  value  of  one  dollar  per  year  from  each  person  as  long  as  he  lives.* 
We  have  already  seen  that,  in  order  to  insure  each  one  for  $1,000,  we  must 
secure  present  values  to  the  amount  of  $34,355,666.83 ;  therefore  each  must  pay 
annually  as  many  times  one  dollar  per  year  as  1,629,648.77  is  contained  times  in 
34,355,666.83.  Performing  the  division  we  get  $21.08;  therefore  each  must 
pay  annually  $21.08;  and  this  is  the  net  annual  premium. 

Proving  Our  Figures. 
In  order  that  we  may  have  a  demonstration  of  the  correctness  of  these 
figures,  and  for  other  purposes,  we  have  prepared  a  table,  which  will  be  found 


•If  we  divide  tiiis  sum  by  81,822 — tlie  nuniljor  of  persons  contributing  it — the  quotient  will 
be  $19,917.  This  Is  the  present  value  of  an  Annuity  Immediate  of  $1  for  age  35.  It  is  distin- 
guished from  an  Annuity  proper  by  the  fact  that  it  begins  with  $1  cash,  while  an  Annuity 
proper  begins  at  tiie  expiration  of  one  year.  The  present  value  of  an  Annuity  proper  of  $1  is 
always  $1  less  tlian  the  present  value  of  an  Annuity  Immediate.  Tables  have  been  worked  out 
showing  these  values  for  all  ages,  and  knowing  how  they  are  obtained,  we  may  hereafter  use 
the  figures  of  the  tables. 


studies  in  Practical  Life  Insurance  13 

on  page  108,  in  Avhich  the  operation  of  receiving  the  net  annual  premium  from 
each  person  living  at  the  beginning  of  the  year,  adding  interest  for  the  year, 
and  paying  the  claims  of  those  who  die  is  carried  on  until  all  are  dead.  This 
table  will  serve  several  purposes :  (1)  It  shows  the  sufficiency  and  the  necessity 
of  the  net  annual  premium;  (2)  it  shows  the  magnitude  of  the  interest  factor 
in  life  insurance;  (3)  it  shows  the  necessity  of  large  accumulations;  (4)  it 
•shows  what  amount  the  company  must  have  on  hand  at  the  end  of  each  year 
for  each  $1,000  of  insurance  taken  at  age  35  under  an  Ordinary  Life  policy. 
This  latter  amount  is  known  as  the  Terminal  net  value,  or  the  reserve. 

These  are  the  questions  that  are  constantly  arising  in  discussions  of  life 
insurance  problems.  If  a  company  is  really  going  to  insm-e  lives  it  must  charge 
an  adequate  premium,  and  what  is  an  adequate  premium  depends  upon  the 
death-rate  and  the  rate  of  interest.  No  mortality  table  can  foretell  the  exact 
death-rate  even  among  a  large  number  of  persons;  but  it  is  necessary  to  have 
a  standard  and  to  conform  to  it.  The  American  Table  is  founded  upon  the 
experience  of  American  life  companies,  and  has  been  found  to  be  a  safe  guide 
in  the  insurance  of  life.  It  represents  a  mortality  somewhat  higher  than  any 
well-managed  company  ought  to  experience,  thus  leaning  towards  the  safe 
side  in  providing  amply  for  death-losses.  Savings  from  mortality  are  easily 
returned  in  the  form  of  dividends,  while  a  deficiency  might  be  fatal  to  the 
company.  In  life  insurance  it  is  always  necessary  to  remember  that  "a  surplus 
is  more  easily  handled  than  a  deficit". 

The  rate  of  interest  assumed  in  calculating  the  net  premium  cf  the  Policy 
under  consideration  is  three  per  cent.,  and  it  will  be  seen  that  the  lower  the 
interest  rate  the  higher  the  premium.  The  assumption  of  a  low  rate  of  interest- 
that  is,  a  rate  that  is  sure  to  be  earned  and  one  that  is  at  present  exceeded— is 
therefore  a  safe  method.  A  life  contract  may  run  for  fifty  years  and  many 
changes  may  take  place ;  the  safe  way  is  to  put  it  on  a  safe  basis  and  adjust  it  to 
actual  conditions  as  they  arise.*  The  excess  of  interest  over  three  per  cent,  can 
be  returned  in  dividends  just  as  is  the  saving  from  mortality.! 

Some  Important  Deductions. 

The  Table  shows  the  necessity  of  large  accumulations  in  regular,  or  reserve, 
life  insurance,  and  a  study  of  it  should  convince  any  one  of  the  unreasonableness 
of  the  prejudice  that  exists  respecting  such  accumulations.     A  life  insurance 


♦It  will  be  seen  later  on  that  if  a  man  insured  at  age  25,  lived  to  age  75,  and  left  the 
proceeds  of  his  policy  to  a  daughter  aged  25,  who  in  turn  lived  to  age  75,  the  same  presumption 
as  to  interest  rate  would  need  to  hold  good  for  100  years. 

fEarly  premiums  of  the  New-York  Life  were  based  upon  the  Carlisle  Table  with  interest 
at  4  per  cent.  Later  the  American  Table  was  used  with  interest  at  the  same  rate.  In  1892 
the  American  Table  with  interest  at  3^  per  cent,  was  adopted.  The  American  3  per  cent,  was 
adopted  for  certain  policies  in  1896,  and  at  a  later  time  for  all  new  policies.  The  Table  and  rate 
of  interest  established  by  law  for  the  valuation  of  policy  liabilities  has  had  to  be  kept  in  mind. 
Massachusetts  first  enacted  such  a  law  in  1859  and  adopted  the  Actuaries'  Table  with  4  per 
cent,  interest.  New  York  adopted  the  American  Table  with  interest  at  414  per  cent,  in  1860,  and 
changed  to  the  Actuaries'  Table  with  4  per  cent,  in  1880.  The  latter  is  now  used  to  value 
policies  issued  prior  to  January  1,  1901;  policies  issued  subsequent  to  that  date  are  valued 
by  the  American  Table  with  interest  at  Zh^  per  cent.,  except  that  a  company  may  issue  policies 
on  a  3  per  cent,  bc^sis  and  have  them  so  valued.  See  Sec.  84,  Insurance  Law  of  New  York, 
given  on  page  120. 


14  Studies  in  Practical  Life  Insurance 

company  issues  its  contracts  agreeing  to  do  certain  specific  things  and  is  held  to 
a  rigid  accountability  in  the  fulfilment  of  its  contracts.  The  carrying  out  of 
these  contracts  involves  certain  definite  accumulations  and  the  Company  makes 
them.  The  careless  critic  sees  that  they  are  large  and  at  once  assumes  that  they 
are  larger  than  is  necessarj^  and  that  larger  dividends  should  be  paid.  The  poli- 
tician sees  in  them  a  source  of  revenue  for  the  State  and  advocates  heavier  taxes. 
The  student  of  these  figures  will  see  that  these  large  accumlations  are  necessary 
to  carry  out  the  contracts  made,  and  the  State  law  requires  the  Company  to  keep 
on  hand  these  amounts.* 

AVe  have  noAv  found  that  any  number  of  persons  may  be  insured  at  age  35 
at  a  net  annual  premium  of  $21.08,  and  that  this  net  premium  together  with 
interest  on  accumulations  at  3%  per  annum  will  pay  all  death-losses  as  they 
occur.  In  the  same  manner  we  may  find  the  net  annual  premium  for  each  age. 
But  note  this — each  age  takes  care  of  itself,  because  it  is  there  that  the  law  of 
mortality  operates— not  upon  the  average  age.  For  example:  if  a  company 
were  organized  for  each  age  and  insured  the  number  living  by  the  mortality 
table  at  that  age,  it  is  plain  that  the  net  premiums  and  interest  received  bj'  each 
such  company  would  exactly  pay  the  death-losses  of  each.  The  company  com- 
posed of  young  policy-holders  could  not  help  the  company  composed  of  old 
policy-holders.  Each  would  provide  for  its  own  death-losses.  But  having 
charged  each  man  the  cost  of  insuring  at  his  own  age,  there  would  be  no  injustice 
in  putting  all  ages  together  and  putting  all  the  money  into  one  fund  and  paying 
the  losses  of  all  ages  from  it.  Each  man  pays  for  his  own  risk  and  each  policy 
is  paid  at  maturity.    This  is  what  is  done  in  a  life  insurance  company.! 

The  Loading  for  Expenses,  Taxes  and  Contingencies. 

Having  satisfied  ourselves  that  $21.08  per  year  from  persons  insuring  at 
age  35  will  pay  the  death-losses  of  all  such  persons  as  they  occur,  we  now 
take  up  the  subject  of  "loading".  The  gross  premium  charged  in  this  Policy 
is  $28.11,  showing  that  the  loading  is  $7.03,  or  33  1/3%  of  the  net  premium. 
This  charge  is  to  cover  expenses,  taxes  and  contingencies.  Here  again,  it  is 
desirable  to  provide  enough,  and  any  surplus  arising  from  this  source — as  well 
as  from  excess  of  interest  and  from  mortality  savings — is  available  for  distri- 
bution in  dividends.  It  is  also  necessary,  in  order  to  cover  contingencies,  to 
have  a  surplus.  No  one  would  wish  to  insure  in  a  company  that  had  only  just 
enough  funds  to  cover  its  actual  liabilities. 


*See  Sec.  84,  Insurance  Law  in  Appendix.  The  abatement  of  the  full  amount  during  the 
first  four  years  will  be  discussed  later. 

■j-Sub-standard  risks  are  insured  under  various  plans — by  charging  an  extra,  by  rating 
them  at  a  higher  age  than  the  actual  age,  or  by  putting  them  in  a  special  class  and  apportion- 
ing surplus  on  the  ba.si-3  of  the  actual  mortality  experienced. 

The  bearing  of  this  table  upon  co-operative,  or  assessment,  insurance  should  not  escape 
the  attention  of  even  the  casual  reader.  The  point  is — cost  of  insurance  is  determined  by  age, 
and  any  system  that  fails  to  take  account  of  this  fact  and  to  provide  adequately  and  scien- 
tifically for  It,  is  only  laying  up  trouble  for  itself  and  disappointment  for  its  adherents. 
Average  age  is  no  guide  to  the  cost  of  Insurance.  For  example,  the  death-rate  per  1,000  at  age 
35  Is  8.95  and  at  age  70  it  Is  61.99.  The  death-rate  among  2,000  persons,  1,000  of  each  age, 
would  therefore  be  """  "^  "'  ""  ^^  35.47.  Their  average  age,  however,  would  be  52%.  and  at 
age  53  the  death-rate  per  1,000  is  only  16.33.  As  the  death-rate  increases  more  rapidly  than  the 
age  the  death-rate  among  a  large  number  of  persons  of  different  ages  will  always  be  higher 
than  the  death-rate  at  the  age  corresponding  to  the  average  age. 


Studies  in  Practical  Life  Insurance  15 

While  the  distribution  of  surplus  is  the  next  thing  provided  for  in  the 
Policy,  that  subject  Avill  be  more  easily  understood  after  other  policy  features 
have  been  discussed. 

We  will  retain  the  numbering  of  clauses  used  on  pages  2  and  3  in  the  Policy, 
but  will  group  the  various  benefits  and  provisions  according  to  sul).iect  matter. 

The  Contract— Its  Integrity— Its  Good  Faith. 
Sections  1,  2,  3,  4. 

1.  The  Contract.— It  seems  superfluous  to  say  that  the  Policy  is  free  of 
conditions  as  to  residence,  travel,  or  occupation,  and  that  it  constitutes  the 
entire  contract,  when  no  such  conditions  appear,  and  no  other  paper  is  referred 
to  as  a  part  of  the  contract.  But  such  conditions  and  such  references  have  been 
so  much  used  in  life  policies  until  recently  that  it  seems  necessary  to  empha- 
size their  omission.  Under  former  conditions  the  insured  needed  copies  of  the 
application  and  medical  examination  in  order  to  have  the  entire  contract.  The 
following  States  still  require  a  life  company  to  furnish  the  Insured  with  copies, 
not  only,  of  the  application  and  medical  examination,  but  also  of  every  paper 
signed  by  the  Insured  in  connection  with  the  issue  of  the  Policy:  Colorado, 
Illinois,  Indiana,  Massachusetts,  North  Dakota,  Ohio,  Oklahoma,  Washington. 
The  restrictions  and  the  warranties  formerly  contained  in  the  application  and 
medical  examination,  while  apparently  necessary  in  the  earlier  stages  of  the 
business,  opened  the  door  to  endless  litigation.  Restrictions  were  gradually 
relaxed  until  they  were  finally  abandoned  by  the  leading  companies,  and  when 
the  State  of  New  York  adopted  a  standard  Policy  in  1907,  restrictions  were 
allowed  for  only  one  year.  By  the  amended  law  in  effect  January  1,  1909,  cer- 
tain standard  provisions  were  substituted  for  the  section  prescribing  standard 
policy  forms.* 

2.  Incontestahility.— The  early  policies  were  contestable  for  many  causes. 
When  the  incontestable  clause  was  first  introduced  it  usually  specified  what  the 
Policy  would  not  be  contested  for.  The  present  form  states  the  causes  for  which 
the  Policy  may  be  contested  and  excludes  all  others.  The  causes  allowed  under 
the  New  York  Law  are  non-payment  of  premium,  and  violation  of  conditions  of 
the  Policy  (if  it  contains  any)  relating  to  military  or  naval  service  in  time  of 
war.  The  maximum  limit  in  the  law  is  two  years.  According  to  the  ruling  of 
at  least  one  court,  a  Policy  incontestable  from  date  of  issue  may  always  be  con- 
tested for  fraud,  but  if  it  is  incontestable  after  a  specified  time  the  presiunption 
is  that,  the  company  having  had  opportunity  to  discover  fraud— if  there  was 
any— and  bring  action  to  annul  the  contract,  is  estopped  from  pleading  fraud 
after  the  time  limit  expires.! 

Under  a  New-York  Life  Policy  incontestability  means  that  if  the  person 


*The  New-York  Life  began  the  issue  of  unrestricted  policies  in  1892,  S.  C.  H.  303.  Tlie 
standard  provision  of  tlie  New  York  law  on  this  point  is  as  follows:  Sec.  101,  "3.  A  provision 
that  the  policy  shall  constitute  the  entire  contract  between  the  parties,  but  if  the  company 
desires  to  make  the  application  a  part  of  the  contract  it  may  do  so  provided  a  copy  of  such 
application  shall  be  endorsed  upon  or  attached  to  the  policy  when  issued,  and  in  such  cases  the 
policy  shall  contain  a  provision  that  the  policy  and  the  application  therefor  shall  constitute 
the  entire  contract  between  the  parties." 

fReagan  vs.  Union  Mutual  Life  Ins.   Co.     189  Mass.   555. 


16  Studies  in  Practical  Life  Insurance 

insured  is  the  person  examined  (that  is,  if  there  was  no  substitution),  if  he  is 
really  dead,  and  if  the  Policy  was  in  force  according  to  its  terms  when  death 
occurred,  it  will  not  be  contested.* 

3.  Self -Destruction.— All  the  early  policies  contained  a  clause  making  them 
null  and  void  with  forfeiture  of  all  pa}^nents  to  the  Company  in  case  of  suicide, 
and  under  this  clause  much  litigation  arose.t  It  was  sometimes  impossible  to 
determine  whether  the  Insured  came  to  his  death  by  his  own  hand,  by  accident 
or  by  the  hands  of  others.  The  sanity  of  the  deceased  was  sometimes  in  doubt, 
and  the  injustice  of  contesting  the  payment  of  a  Policy  long  in  force  was  ap- 
parent. The  subject  was  treated  by  different  companies  in  different  ways ;  some 
States  made  laws  on  the  subject.  The  strenuous  competition  of  1892-1905  did 
much  to  liberalize  the  practice  of  companies  on  this  and  other  points.^  The  New 
York  Standard  Life  Policy  of  1907  allowed  a  restriction  of  liability  by  reason  of 
suicide  during  one  year;  the  "standard  provisions"  enacted  in  1909  made  the 
maximum  term  two  years.  As  the  New- York  Life's  incontestable  clause  takes 
effect  one  year  from  date,  the  period  of  its  limited  liability  in  case  of  self- 
destruction  is  made  to  correspond.  That  there  may  be  no  forfeiture  of  money 
the  Company  returns  the  premium  paid  in  such  cases.| 

4.  Age.—Oi  all  methods  of  adjustment  in  case  of  misstatement  of  age  this 
seems  fairest.  There  is  no  penalty— simply  an  adjustment  of  the  real  risk  to 
the  actual  amount  paid.  Three  other  methods  have  been  used:  if  the  age  was 
undei-stated  (1)  consider  it  fraud,  or  (2)  require  payment  of  difference  in 
premium  with  interest;  (3)  if  age  was  overstated  return  excess  payments  with 
interest.  The  first  was  harsh  and  unjust;  the  second  was  to  the  Insured  in  the 
nature  of  paying  for  a  dead  horse;  under  the  third  the  Insured  did  not  receive 
for  a  part  of  his  money  what  he  intended  to  purchase — namely,  insurance.  The 
method  here  used  is  simple,  direct,  and  its  fairness  is  apparent. 

Contract  Changes— op  Beneficiary— to  Other  Forms. 
Sections  7,  8  and  13. 

7.  Change  of  Beyieficiary.—^exi  in  importance  to  the  question  of  being 
insured  at  death  is  the  question,  to  whom  shall  the  insurance  be  paid?  It  will 
be  noticed  that  this  Policy  is  made  payable  "to  the  wife  of  the  Insured  with  right 
•of  revocation".  It  might  have  been  made  without  such  right — the  Insured  has 
his  choice.  It  might  be  in  favor  of  a  child  or  other  dependent  whose  dependence 
would  be  only  temporary.  Experience  has  shown  that  policies  with  the  right  of 
revocation  provide  for  more  contingencies  than  those  without  it.  Unless  the 
Insured  gives  up  the  right,  the  Policy  is  always  under  his  control. 

8.  Privilege  of  Change  to  Other  Forms  of  Policies.— There  are  sometimes 
■"misfits"  in  life  insurance.    The  "best  Policy  to  take"  depends  upon  circum- 


•The  first  Incontestable  clause  used  by  the  New-York  Life  was  adopted  in  June,  1889,  and 
became  operative  after  two  years.  In  1892  a  one  year  clause  was  adopted,  and  In  1899,  an 
incontestable-from-date-of-issue  clause  was  adopted.  (S.  C.  H.  pp.  250.  303,  H.  p.  30).  The 
present  one  year  clau.se  was  adopted  In  1907,  In  order  to  comply  with  tlie  Massacliusetts  statute. 

tTlie  New-Yorii  Life  eliminated  the  suicide  clause  from  its  policies  in  1850,  but  it  was 
retained  by  many  companies  until  1892  and  after. 

JFor  other  historical  data  see  S.  C.  H.   35,   IGl.   note. 


studies  in  Practical  Life  Insurance  17 

stances  and  circumstances  change.  The  young  man  who  needs  all  the  insurance 
he  can  carry  at  Ordinary  Life  rates  insures  under  an  Ordinary  Life  Policy.  By 
and  by  he  is  making  big  money  and  he  would  like  to  pay  up  his  insurance 
within  a  definite  period,  or  perhaps  change  to  an  Endowment  Policy.  This  clause 
gives  him  the  privilege  provided  he  is  under  60  years  of  age. 

10.  Assignment.— The  Insured  may  wish  to  pledge  his  Policy  for  some 
temi)orary  purpose ;  in  that  case  an  assignment  may  be  used  instead  of  changing 
the  beneficiary.  The  Company  assumes  no  responsibility  for  the  validity  of 
any  assignment — but  pays  it  to  whoever  may  be  adjudged  to  be  the  owner 
at  maturity.     " 

13.  Paid-up  and  Endoicnient  Options.— By  reference  to  the  table  on  page 
IDS  it  will  be  seen  that  the  r.eserve  on  the  Policy  constantly  approximates 
the  face  of  the  Policy  and  reaches  it  at  age  96.  Sometimes  a  policy-holder  lives 
that  long.  The  New-York  Life  had  one  such  case  in  1908,  one  in  1909,  and 
one  in  1911,  and  although  there  was  no  such  stipulation  as  this  in  the  contracts 
the  Company  paid  the  policies  to  the  living.  They  were  insured  until  the  plan 
on  which  they  were  insured  was  complete  and  the  face  of  their  policies  was  in 
the  Company's  hands. 

In  our  examination  of  the  net  premium  we  found  that  a  certain  amount  in 
hand,  called  the  net  single  premium,  would  pay  all  future  death-loss  charges 
on  the  Policy.  Now  it  sometimes  happens,  when  the  Insured  uses  his  dividends 
to  purchase  paid-up  insurance,  that  the  reserve  on  the  face  of  the  Policy, 
together  with  the  reserve  on  the  dividend  additions,  equals  the  net  single 
premium  long  before  age  96.  In  that  case  the  policy-holder  would  have  the 
right  to  have  his  Policy  endorsed  as  paid-up  and  no  more  premiums  need 
thereafter  be  paid.  This  is  an  additional  inducement  to  use  dividends  in  this 
■vvay — the  first  being  that  they  continually  add  to  the  insurance  carried  under 
the  Policy. 

Keeping  the  Contract  in  Force. 
Sections  5,  6,  12,  9  and  14. 

5.  Payment  of  Premiums.— y\e  come  now  to  the  specific  duty  of  the  polity- 
Jiolder — the  one  thing  he  has  to  do  under  this  Policy  in  order  to  make  it  effective 
— he  must  pay  the  premiums  as  stipulated — if  he  wishes  the  Policy  to  go  on  as 
contemplated.  We  saw  in  our  examination  of  the  premium  rate  that  this  is 
payable  yearly  in  advance,  hence  the  treatment  of  unpaid  quarterly  and  semi- 
annual premiums  at  death  will  be  readily  understood.  The  meaning  of  the 
last  sentence  in  this  clause  is  that  when  the  time  expires  to  which  a  premium 
is  paid  some  other  provision  of  the  Polic}"  must  come  into  operation  if  it  is  to 
be  kept  in  force.  We  shall  see  later  what  these  other  provisions  are.  Premium 
payments  are  facilitated  in  this  way:  Policy-holders  living  in  the  vicinity 
of  the  Home  Office  pay  their  premiums  there.  The  Company  has  Branch 
Offices  in  the  principal  cities  of  the  country,  and  the  territory  is  parceled  out 
among  them.  At  least  fifteen  and  not  more  than  forty-five  days  before  a 
premium  falls  due  a  notice  is  sent  to  the  Insured,  in  accordance  witti  the 
Law  of  Neiv  Yorh  State,  notifying  him  that  a  premium  on  his  Policy  will  fall 


18  Studies  i)i  Practical  Life  Insurance 

due  on  such  ;i  dny,  wlicre  it  may  be  ])ai(l  Miid  the  renewal  receipt  obtained.* 
In  si>me  cases  policy-holders  are  notified  that  they  may  pay  premiums  at  certain 
banks.  The  purpose  is  to  make  the  payment  of  premiums  as  convenient  as 
possible. 

^len  insure  their  lives  because  life  is  uncertain,  but  as  soon  as  a  contract  is 
nuule  to  insure  life  it  is  seen  that  many  other  things  are  uncertain,  and  that  the 
contract  must  provide  for  these  things  if  it  is  to  do  what  men  really  wish  to 
have  done  when  they  insure.  If  the  Insured  pays  his  premium  as  agreed  the 
contract  goes  on,  but  the  thoughtful  man  asks — What  if  I  fail  to  pay  it  on  the 
day  it  is  due  ?    The  first  answer  is — 

6.  Grace.  — The  provision  is  practically  a  loan— automatically  made  by  the 
Company  at  five  per  cent,  interest.  It  may  run  a  month,  if  desired,  and  if  the 
premium  falls  due  in  February  the  month  is  coitsidered  as  including  thirty  days. 
The  interest  charge  and  the  deduction  of  the  year's  premium  in  case  of  death 
during  the  month  simply  carry  out  the  plan  upon  which  the  premium  rate  is 
calculated,  t  The  practice  of  the  New- York  Life  is,  as  soon  as  the  month  of 
grace  begins  to  notify  the  policj^-holder  of  that  fact ;  to  call  his  attention  to  the 
interest  charge ;  and  to  state  the  date  upon  which  the  month  of  grace  will  ex- 
pire. After  the  expiration  of  the  month  of  grace,  if  the  premium  remains 
unpaid,  a  letter  is  sent  by  the  Premium  Cashier  at  the  Home  Office,  or  by 
the  Cashier  of  the  Branch  Office  where  the  premium  is  payable — as  the  case  may 
be — urging  its  payment  and  saying:  "If  you  find  it  inconvenient  to  do  this, 
kindly  let  me  know  M^hat  amount  of  cash  you  can  remit,  and  how  long  a  time 
you  will  need  to  meet  the  entire  amount,  and  I  may  be  able  to  suggest  some  plan 
by  which  you  can  keep  your  Policy  in  force. ' '  What  plan  would  be  suggested 
would  depend  upon  conditions,  but  every  indulgence  is  granted  consistent  with 
the  rights  of  both  parties  to  the  contract. 

12,  Premium  Loans.  —  One  of  the  methods  used  is  set  forth  in  this  section. 
It  provides  for  a  loan  to  the  amount  of  the  premium  due  without  the  deposit  of 
the  Policy  and  without  the  formalities  incident  to  obtaining  a  regular  policy 
loan.  The  Company  simply  requires  that  the  loan  and  interest  shall  not  exceed 
the  total  cash  surrender  value  of  the  Policy. $ 

9.  Reinstatement.  — The  three  foregoing  sectitms  provide  methods  of  keep- 
ing the  Policy  in  force  when  it  is  impossible  to  pay  the  premium  at  the  time  it 
falls  due.  This  section  supposes  the  Policy  to  have  lapsed  for  non-payment  by 
any  of  these  methods.  Even  if  it  had  no  surrender  value  it  would  be  better  to 
have  it  reinstated  than  to  take  a  new  Policy,  because  it  is  so  much  nearer  the 
non-forfeiture  stage  and  the  larger  cash  values.  If  therefore  the  insured  fur- 
nishes evidence  of  insurability  satisfactory  to  the  Company  and  pays  the  back 
premiums  with  interest,  his  Policy  is  placed  in  the  same  position  as  if  it  had  not 
lapsed.  Systematic  and  persistent  efforts  are  made  to  induce  men  to  reinstate 
lapsed  Policies. 

•Insurance  I^aw,  Sec.  92— Appendix. 

fOver  two  hundred  thousand  prcmium.s  were  paid  directly  to  the  Home  Office  in  1909  and 
the  amount  of  intere.st  received  on  premiums  tlius  paid  during  the  month  of  grace  was  over 
18,000.     T.  H.  97. 

JThe  total  amtmiit  of  I'r.iniiim  T.naiis  of  all  ..pmi.imios  in  tli.'  United  States  on  December 
31,  1909,  was  $27.242, 938. 


studies  i)t  Pnictical  Life  Insurcnice  19 

14.  Benefits  on  Surrender  or  Lapse.— We  have  now  considered  every 
available  method  of  keeping  the  Policy  in  force  on  the  original  basis.  Suppose 
all  these  fail— what  then?  Suppose  the  time  comes  when  the  Insured  either 
wishes  the  value  of  his  Policy  in  cash  or  in  insurance,  without  the  payment  of 
any  more  money.  This  section,  together  with  the  "Table  of  Loan  and  Surren- 
der Values"  on  page  three  of  the  Policy  shows  what  he  would  receive,  provided 
he  had  paid  two  or  more  years'  premiums.  These  benefits  are  based  upon  the  fact 
that  the  Policy  has  a  certain  cash  value  and  that  this  value  may  be  taken  either  in 
cash  or  in  insurance ;  and  if  in  insurance  it  may  be  either  for  the  face  amount  of 
the  Policy  during  a  limited  period,  or  for  a  smaller  sum  of  insurance  which  will 
continue  until  death.  The  option  of  continued  insurance  for  the  face  amount 
of  the  Policy  is  made  automatic  if  no  choice  is  made.  It  is  assumed  that  if 
the  Insured  has  any  choice  he  will  exercise  it ;  but  that  if  he  has  no  choice,  or  is 
unable  to  make  it  by  reason  of  illness,  absence  or  forgetfulness,  then  continued 
insurance  for  the  larger  amount  will  best  protect  his  interests. 

The  Cash  Surrender  Value  and  the  surrender  charge  will  be  treated  of  in 
connection  with  our  examination  of  the  "Table  of  Loan  and  Surrender  Values". 

The  Contract  as  a  Bank  Credit. 
Section  11. 

11.  Cash  Loa^s.  — Section  eleven  provides  for  cash  loans.  This  assumes 
that  the  premiums  continue  to  be  duly  paid,  and  that  the  cash  surrender  value 
of  the  Policy  is  drawn  against  somewhat  as  a  bank  account  might  be,  or  as 
one  might  borrow  at  the  bank  by  pledging  bonds  or  stocks  as  collateral 
security.  This  was  first  allowed  by  law  in  New  York  in  1892.  Prior  to  that 
time  Premium  Notes  might  be  received  by  the  Company  for  a  part  of  the 
premiums  falling  due,  but  the  Company  was  not  permitted  to  loan  money  on 
its  own  contract  obligations,  although  they  might  be  very  valuable.  Compara- 
tively few  Policies  were  issued  with  provisions  for  cash  surrender  value,  except 
after  a  period  of  ten  years  or  more ;  hence  the  Insured  might  have  much  money 
locked  up  in  his  Policy  and  yet  be  unable  to  avail  himself  of  any  portion  of  it  in 
a  time  of  need.* 

Loan  and  Surrender  Values— Surrender  Charge. 

We  will  now  consider  how  the  loan  and  surrender  values,  .the  amoimts  of 
paid-up  insurance  and  the  time  limits  on  term  extension  are  arrived  at.  Turning 
to  page  108  it  will  be  seen  from  the  last  cohunn  of  the  Table  that  the  Company 
has  on  hand  at  the  end  of  each  year  for  each  $1,000  insurance  of  this  kind  a 
certain  amount  of  money  called  the  reserve  fund,  or  the  reserve.  The  various 
values  guaranteed  in  the  Policy  and  shown  in  the  "Table  of  Loan  and  Surrender 
Values"  are  based  upon  the  amount  of  the  resei-vc  lidd  by  the  Company  for  each 
$1,000  insurance  at  the  end  of  various  years. 

*The  amount  of  Policy  Loans  by  all  companies  in  the  United  States  on  December  31, 
1909,  was  $419,033,530.  The  amount  thus  loaned  by  the  New-York  Life  Insurance  Company 
was  nearly  $70,000,000.  The  Policy  Loan  Division  of  the  Home  Office  consists  of  a  Superin- 
tendent and  a  clerical  force  of  thirty-seven  persons.  Over  80,000  cases  are  handled  in  a  year. 
The  Policies  deposited  as  collateral  security  are  cared  for  by  the  Division  of  Policy  Loan 
Securities,  consisting  of  a  Superintendent  and  a  clerical  force  of  twenty-nine.  The  Division 
has  the  e.xclusive  use  of  a  fire-proof  vault  29  x  30  x  12  feet,  furnished  with  steel  cabinets. 


20  Studies  in  Practical  Life  Insurance 

In  making  up  this  Table  the  Company  has  been  governed  by  three  con- 
siderations—the equities  of  the  ease,  the  non-forfeiture  laws  of  the  various  States 
and  the  practice  of  other  companies.  It  might  be  said,  the  equities  of  the  case 
should  be  a  sufficient  rule ;  but  equity  is  a  relative  term  here  and  has  been  estab- 
lislied  by  changing  custom.  Under  life  Policies  as  originally  issued,  no  cash 
value  or  paid-up  insurance  was  promised;  if  the  premium  was  not  paid  as 
agreed  the  Policy  lapsed  and  all  payments  thereon  were  forfeited.  But  usage 
soon  bettered  the  contract— the  companies  began  to  give  paid-up  insurance  and 
to  pay  surrender  values;  then  they  promised  them  in  the  policies;  and  then  the 
States  began  to  enact  laws  governing  surrenders.* 

It  has  been  assumed  from  the  beginning  that  the  insuring  company  is  en- 
titled to  a  "surrender  charge"  if  the  Insured  asks  for  the  value  of  his  Policy 
in  either  cash  or  insurance— unless  he  has  been  insured  during  a  considerable 
period  of  time.  No  law  has  ever  required  a  surrender  value  of  any  kind  unless, 
at  least  two  years'  premiums  have  been  paid.  No  State  now  requires  non-for- 
feiture provisions  until  three  years'  premiums  have  been  paid,  but  all  allow 
companies  to  pay  surrender  values  earlier  at  their  option.  Canada,  on  the  other- 
hand,  requires  policies  to  be  non-forfeiting  after  three  years  and  does  not  allow 
the  issue  of  policies  guaranteeing  surrender  values  until  three  years'  premiums 
have  been  paid.  The  laws  of  every  State  base  the  surrender  value  upon  the 
reserve,  either  by  a  specified  standard  or  by  the  standard  upon  which  the  Policy 
is  issued,  and  all  allow  a  surrender  charge,— that  is  to  say,  a  deduction  is  allowed 
to  be  made  from  the  reserve  and  the  balance  is  the  cash  value  which  may  be 
either  received  in  cash  or  used  to  purchase  paid-up  or  temporary  insurance.  The 
surrender  charge  allowed  under  most  State  laws  is  21/2%  of  the  amount  insured. 
In  one  State  it  is  37c  of  the  insurance.  Sometimes  it  is  20 7o  of  the  reserve  or  a 
percentage  of  the  insurance,  whichever  is  greater ;  in  one  State  it  is  20%  of  the- 
reserve;  and  in  Massachusetts  it  is  "5%  of  the  present  value  of  the 
future  net  premiums  which  by  its  terms  the  Policy  is  exposed  to  pay 
in  case  of  its  continuance".  "While  these  laws  are  not  edways  appli- 
cable to  the  companies  of  other  States,  it  is  desirable  to  keep  within  the 
limits  they  prescribe.  The  reason  for  allowing  a  surrender  charge  is  that  the 
Insured  has  entered  into  a  contract  which  has  cost  the  Company  considerable 
money  to  secure ;  that  the  contract  gives  the  Insured  the  right  to  stay  in  the  Com- 
pany for  life — the  Company  cannot  withdraw  from  it ;  that  those  who  choose  tO' 
withdraw  are  likely  to  be  the  best  risks,  while  those  who  are  conscious  of  any  im- 
pairment of  health  are  likely  to  remain  to  claim  the  benefit  of  their  contracts. 
Life  insurance  can  only  be  carried  on  by  the  co-operation  of  many  persons ;  all 
enter  into  the  plan  of  co-operation  upon  equal  terms,  all  known  inequalities  being 
adjusted  in  the  contract.  But  the  contingencies  against  which  they  insured 
begin  to  happen  immediately— some  die,  the  health  of  others  becomes  impaired,. 
Those  who  withdraw  must  make  good  to  those  who  remain  the  loss  thus  caused. 
The  surrender  charge  is  supposed  to  represent  this  loss,  or  the  cost  of  securing  a. 
new  member  in  place  of  the  one  who  withdraws. 


>For  early  history  on  this  siiViiprt  spe  .«:.  C.  H.  pp.  58-63. 


studies  in  Practical  Life  Insurance  21 

Computing  Paid-up  Insurance  Values. 

Having  stated  the  law  and  the  facts  we  now  come  back  to  the  Table  in  the 
Policy  under  consideration  to  see  hoAv  they  are  harmonized.  Under  the  laws  the 
Company  is  not  required  to  allow  a  surrender  value  during  the  second  year,  and 
is  not  allowed  to  do  so  in  Canada.  In  the  States,  however,  practically  one-half  of 
the  reserve  is  allowed  as  a  surrender  value  after  two  years'  premiums  have  been 
paid.  The  reserve  in  this  case  is  $26.13,  the  cash  or  loan  value  is  $13  per 
$1,000.  The  amount  of  paid-up  life  insurance  shown  in  "Column  2"  for  tliis 
year  is  the  amount  which,  according  to  the  law,  as  applied  to  other  years,  the  cash 
value  will  purchase  used  as  a  net  single  premium  at  the  attained  age  of  the 
Insured.  The  attained  age  here  is  37  years,  when  the  net  single  premium  per 
$1,000  is  $435.    We  have  then  the  proportion-$435  :  $1,000  : :  $13  :  $29. 

The  same  general  rule  is  applied  in  determining  the  time  for  which  the 
insurance  Avill  be  continued  under  option  (b),  but  not  quite  so  easily.  The 
cash  value  is  used  as  a  net  single  premium  but  the  time  cannot  be  determined 
by  a  single  proportion.  The  present  values  of  the  cost  of  insurance  must  be 
calculated  year  by  year  until  the  money  is  used  up.  The  Insured  is  now  aged 
37.  At  age  37  the  risk  of  death  is  the  number  dying  in  that  year  divided  by 
the  number  living  at  the  beginning  of  the  year  according  to  the  Mortality  Table, 
or  ^^^.  This  gives  the  decimal  .009234;  therefore  for  an  insurance  of  $1,000 
one  must  pay  1,000  times  this  decimal  or  $9.23.  Discounting  this  for  one  year 
at  3%  we  have  $8.96,  which  carries  the  insurance  for  one  year.  Only  $4.03 
now  remains.  By  a  similar  process  we  shall  find  the  cost  of  $1,000  insurance  at 
age  38  to  be  $9.41,  the  present  value  of  which,  discounted  at  3%  for  two  years  is 
$8.87.  For  less  than  one  year  the  proportional  method  may  be  used,  and  we  have 
8.87  :  12  : :  4.03  :  5.4.  As  the  Company  is  giving  more  than  the  law  requires  the 
nearest  full  month  is  used. 

At  the  end  of  the  third  year  w^e  have  a  cash  value  of  $32  and  the  insurance 
is  extended  three  years  and  seven  months.  We  may  verify  this  in  the  same 
manner.  We  begin  now  with  age  88.  The  process  may  be  outlined  as  follow^s: 
Divide  the  number  dying  by  the  number  living  to  get  the  probability  of  dying; 
multiply  this  decimal  by  1,000  to  get  the  cost  of  insuring  $1,000  during  that 
year;  multiply  the  result  by  the  present  value  of  $1  due  in  the  required 
number  of  years.  The  result  will  be  the  present  value  of  the  cost  of  insurance 
for  that  year.  Continue  this  process  until  the  sum  of  these  present  values 
exceeds  the  sum  you  have  to  expend.  Take  the  sum  of  all  except  the  last  and 
subtract  it  from  the  sum  you  have  to  expend  and  use  the  remainder  as  a  factor 
of  the  proportion  with  the  present  value  of  the  cost  of  insurance  for  that  year. 
It  works  out  as  follows : 

1st  year  -^^  X  1000  =  9.41  present  value  $9.14 
2d  year  -^^^  X  1000  =  9.586  present  value  9.04 
3d  year  ^=|^,  X  lOOO  =  9.79  present  value  8.96 
4th  year  ^^  X  1000  =  10.01  present  value     8.89 


22  Studies  in  Practical  Life  Insurance 

The  sum  of  the  first  three  of  these  terms  is  $27.14,  and  this  deducted  from  $32 
leaves  $4.86.    We  then  have  the  proportion :    8.89  :  12  : :  4.86  :  Answer  6.6. 

Therefore  $32  cash  in  hand  at  age  38  will  extend  an  insurance  of  $1,000 
for  a  period  of  three  years  and  seven  months.* 

The  Surrender  Charge  Examined. 

Beginning  with  the  third  year  the  maximum  surrender  charge — and  hence 
the  minimum  cash  value — is  fixed  by  law,  but  a  company  may  make  the  charge 
less  and  the  value  more  if  it  choose,  and  this  is  done  here.  The  following  table 
shows  the  reserve  at  the  end  of  the  different  years  up  to  the  tenth,  fractional 
parts  of  the  dollar  being  omitted,  the  cash  value,  the  surrender  charge  and  the 
percentage  of  the  surrender  charge  to  the  reserve : 

Year        Preserve      Cash  Value    Sur. 


3  $39  $32 

4 53  44 

5  68 58 

6 82  72 

7  98  90 

8  113  108 

9  129  127 

10 146  146 


barge 

$7 

% 
.  .   17.9 

9 

17.0 

10    

.  .  .  .   14.7 

10   

12.2 

8   

8.2 

5 

4.4 

2   

.  .  .  .      1.6 

It  will  lu'  seen  that  the  surrender  charge  begins  in  the  third  year  at  17.9% 
of  the  reserve  or  less  than  1.5%  of  the  amount  insured— the  maximum  surrender 
charge  stated  in  the  Policy— and  gradually  diminishes  until  at  the  end  of  the 
tenth  year  it  disappears  entirely.  The  amounts  in  "column  2"  and  the  time 
in  ' '  column  3 ' '  are  found  for  other  years  in  the  same  manner  as  before. 

It  only  remains  to  be  shown  that  the  surrender  charge  is  within  the  terms 
of  the  jMassachusetts  law.  When  three  years'  premiums  have  been  paid  on  an 
Ordinary  Life  Policy  beginning  at  age  35,  the  Policy  is  exposed  by  its  terms  to 
pay  net  annual  premiums  in  the  same  proportion  that  a  man  aged  38  is  exposed 
to  receive  an  annuity.  The  present  value  of  such  premiums  is  therefore  obtained 
by  multiplying  the  amount  of  the  net  premium  $21.08  by  the  value  of  an 
"annuity  immediate"  of  $1  at  age  38.  This  value  is  $19,125  and  the  product 
is  $403.16.  The  surrender  charge  allowed  in  this  case  is  therefore  5%  of  $403.16, 
or  $20.16,  which  is  greater  than  the  surrender  charge  made  in  the  Policy. 

We  may  in  the  same  manner  find  the  surrender  charge  for  other  years.  For 
example,  at  the  end  of  the  6th  year  we  would  have  the  present  value  of  $1 
annuity  immediate  at  age  41  (18.265)  multiplied  by  $21.08=$385.03,  5%  of 
which  is  $19.25.  In  the  same  manner  we  should  find  the  surrender  charge  allow- 
able at  the  end  of  the  10th  year  to  be  $17.93.  As  the  legal  surrender  charge 
begins  with  a  larger  amount  than  the  surrender  charge  actually  made  and  de- 
creases more  slowly,  it  will  always  be  larger. 

Paying  Death-Losses— Equivalent  Values. 

We  have  turned  aside  into  many  by-paths— suppositions  of  what  tlic  Insured 
may  do,  and  guarantees  of  what  the  Company  will  do  in  such  and  such  cases— 


•In  actual  office  work  tables  are  used  which  show  the  present  value  of  extending  Insur- 
ances at  any  age  for  one  year,  two  years,  etc.  The  above  shows  the  principles  upon  which 
such  tables  are  based. 


Studies  in  Practical  Life  hisiirance  '2'-\ 

but  we  have  always  come  back  to  the  main  road,  and  now  we  are  almost  home 
We  are  almost  to  the  end— an  end  which  comes  to  every  man  wliether  he  is 
insured  or  not— for  now  we  are  to  consider— 

15.  Modes  of  Settlement  upon  the  Death  of  the  Insured.— The  Policy  is 
payable  on  its  face  to  a  Beneficiary  named  and  in  cash,  but  this  Beneficiary  may 
have  been  changed,  or  an  assignment  may  have  been  made.  If  there  is  an  exist- 
ing assignment  of  the  Policy  it  is  paid  to  the  assignee  in  cash  as  his  interest  may 
appear.  If  there  has  been  a  change  of  Beneficiary  that  fact  will  appear  in  its 
proper  place  on  page  4.  If  the  Insured  has  selected  any  other  mode  of  payment 
than  cash,  that  will  also  appear  on  page  4.  The  modes  other  than  cash  which  the 
Insured  may  select  while  living,  or,  in  default  of  such  selection,  which  may  be 
selected  by  the  Beneficiary  after  the  Policy  becomes  a  claim,  will  now  be  con- 
sidered. 

(1)  This  mode  provides  that  the  Beneficiary  receive  interest  on  the  net 
sum  payable,  during  her  lifetime,  and  that  the  principal  be  paid  to  her  legal 
representatives  or  assigns.  This  is  similar  to  the  provision  in  a  will  that  a  wife 
receive  interest  on  a  certain  sum  during  her  lifetime,  which  becomes  a  part  of 
the  residuary  estate  at  her  death. 

(2)  This  mode  distributes  by  instalments  the  entire  value  of  the  Policy, 
including  interest  on  the  unpaid  portion  during  the  years  in  which  the  distribu- 
tion is  made.  This  will  therefore  require  a  little  examination.  The  question  is— 
For  $1,000  in  hand  how  much  should  the  Company  pay  each  year  for  two  years, 
three  years,  four  years,  etc.,  money  being  worth  3%  ?  In  short  how  did  the 
Company  arrive  at  the  figures  in  "column  2"  under  this  option?  In  order  to 
pay  $1  now  and  one  dollar  one  year  hence  we  must  have  in  hand  $1  plus  the 
present  value  of  $1  due  one  year  hence,  or  $1.970874;  and  if  this  amount  will 
enable  the  Company  to  pay  two  instalments  of  $1  each,  $1,000  in  hand  will 
enable  it  to  pay  as  many  dollars  as  1.970874  is  contained  times  in  1,000.  IMaking 
the  division  we  get  507.39.  To  get  the  amount  for  any  other  number  of  years, 
we  have  only  to  add  to  $1  the  present  values  of  $1  due  in  as  many  years  as  the 
required  number  of  payments  less  one  and  use  the  sum  as  a  divisor  as  before. 
For  example,  the  sum  of  the  first  four  amounts  in  the  table  of  present  values  of 
$1  on  page  107  is  $3.7171.  Adding  $1  for  the  first  payment  and  dividing 
1,000  by  the  sum  gives  $211.99,  the  amount  to  be  paid  annually  for  five  years. 

Twenty  Instalments  Certain  and  Annuity. 

(3j  This  option  provides  for  twenty  payments  certain,  and  for  an  annuity 
of  an  equal  amount  as  long  as  the  Beneficiary  may  survive  thereafter.  First  we 
will  consider  the  twenty  annual  payments  certain.  Let  us  see  how  much  will  be 
required  to  pay  $1  in  cash  and  $1  at  the  end  of  one  year,  two  years,  etc.,  up  to 
nineteen.  ^Xe  may  add  to  $1  the  present  values  of  $1  at  the  end  of  each  year 
up  to  nineteen,  oi-  we  may  take  from  the  proper  cohunn  on  page  107  the 
present  value  of  $1  per  annum  for  nineteen  years  and  add  this  to  $1.  By  either 
method  we  get  $15,324. 

Now  we  must  find  the  sum  in  hand  necessary  to  pay  $1  per  year  during 
the  remainino-  rears  of  the  life  of  the  Beneficiary— if  she  should  live  beyond 


24  Studies  in  Practical  Life  Insurance 

the  twenty  years.  The  Insured  under  the  present  Policy  is  aged  35.  If  the 
Beneficiary  is  two  years  younger  and  the  Insured  should  die  at  age  50,  the 
Beneficiary  if  living  would  then  be  age  48.  When  tw^enty  annual  instalments 
have  been  paid  the  Beneficiary — if  living — will  be  68  before  another  instal- 
ment will  be  due.  First  we  ascertain  how  many  will  outlive  the  twenty  years. 
The  number  living  at  age  48  (in  the  American  Table)  is  71,627,  at  age  68  it  is 
43,133.  What  amount  must  we  have  on  hand  for  each  of  the  71,627  at  age  48 
in  order  to  pay  $1  per  j^ear  for  life  to  each  one  of  the  43,133  who  will  be  living 
at  age  68?  We  will  first  ascertain  Avhat  amount  we  must  have  on  hand  twenty 
years  hence  and  then  discount  it  for  twenty  years.  When  we  considered  the 
subject  of  net  annual  premium  we  first  found  the  present  value  of  $1  per  year 
paid  by  the  number  living  according  to  the  mortality  table  from  the  age  of 
insurance  until  the  end  of  life.  It  is  obvious  that  the  present  value  of  $1  each 
year  to  be  received  hy  the  living  will  be  the  same  as  the  amount  of  $1  per  year 
to  be  paid  by  the  living.  The  present  value  of  $1  per  year  to  or  from  each  of 
the  living  from  age  68  to  the  end  of  the  table  may  be  obtained  as  explained 
in  the  former  case,  or  we  may  take  the  value  of  an  Annuity  Immediate  from 
the  table  at  age  68  ($8,381)  and  multiply  it  by  the  number  of  the  living  at  that 
age  (43,133).  By  either  method  we  shall  get  $361,497.67,  which  is  the  sum 
necessary  to  pay  $1  each  to  43,133  persons  aged  68  and  $1  per  year  for  each 
year  of  life  thereafter.  Discounting  this  at  3%  for  twenty  years  gives 
$200,152.58.  Dividing  this  amount  by  71.627  the  number  living  at  48  gives 
$2,794. 

This,  then,  is  the  amount  which  must  be  on  hand  for  each  person  at  age  48 
to  pay  $1  each  annually  for  life  to  those  living  at  age  68.  We  have  already 
found  that  the  sum  in  hand  necessary  to  pay  $1  annually  for  twenty  years  is 
$15,324.  Adding  these  two  amounts  together  we  have  $18.118— which  is  the 
sum  we  must  have  in  hand  in  order  to  pay  twenty  annual  instalments  of  $1 
each  and  an  annuity  of  $1  per  year  to  the  survivors  of  those  living  at  age 
48  when  the  payment  of  instalments  begins.  But  we  have  on  hand  $1,000, 
therefore  we  can  make  the  instalment  and  the  annuity  as  many  dollars  as 
18.118  is  contained  times  in  1,000,  which  is  55.19,  the  amount  shown  in  the 
table. 

Value  of  the  Instalment  Option. 

The  wisdom  of  making  a  life  Policy  payable  in  instalments,  or  of  the 
Beneficiary  choosing  such  a  method  of  receiving  the  proceeds  of  a  maturing 
Policy  is  coming  to  be  widely  recognized.  The  Beneficiaries  are  not  usually 
persons  who  are  accustomed  to  making  investments,  and  the  Policj'  often  repre- 
sents their  all.  They  seldom  need  the  full  amount  of  the  Policy  at  once— but 
need  just  sufficient  to  cover  current  expenses.  Under  these  options  their  money 
is  safely  kept  and  interest  is  paid  on  the  unused  portion,  and  almost  every  con- 
ceivable contingency  is  provided  for— except  that  of  a  Policy  too  small  to  provide 
for  large  needs!    That  can  he  remedied  only  hy  the  Insured  before  he  dies. 

It  will  be  noted  that  under  certain  circumstances  payments  will  be  made 
semi-annually,   quarterly,  or  monthly,   if  desired.     AA^hen  payments  are  made 


studies  in  Practical  Life  Insurance  25 

oftener  than  once  a  year  no  additional  interest  is  allowed  on  this  account.  The 
use  of  the  money  compensates  the  Company  for  drawing  two,  four  or  twelve 
checks  instead  of  one.  The  beneficiary  has  the  benefit  of  safety  and  regularity 
of  income.  Provision  is  made  for  a  rate  of  interest  in  excess  of  3%  in  case  the 
Company  shall  declare  a  higher  rate  upon  funds  so  held.  Policies  upon  which 
there  is  an  existing  assignment,  those  under  which  the  Beneficiary  is  a  firm  or 
corporation,  and  policies  under  which  the  net  sum  payable  is  less  than  $1,000 
are  paid  in  cash.* 

How  Dividends  May  Be  Used. 

It  will  be  noted  that  the  guarantees  of  the  Policy  under  consideration  relating 
to  dividends  are  the  following:  that  it  shall  participate  in  the  surplus  of  the 
Company ;  that  the  portion  of  divisible  surplus  accruing  on  this  Policy  shall  be 
ascertained  and  distributed  annually;  and  that  this  dividend  shall  be  available 
at  the  option  of  the  Insured  in  either  of  four  ways,  Avhich  are  fully  set  forth  in  the 
Policy  itself.  A  few  comments  may  be  helpful.  Options  one  and  two  are  practi- 
cally the  same,  except  in  the  case  of  policies  upon  which  the  premiums  have  all 
been  paid.  Under  option  three  the  dividend  would  be  used  to  purchase  paid-up 
insurance  at  the  net  single  premium  rate  plus  a  loading  which  is  the  equivalent 
of  $2  annually  per  $1,000  of  the  insurance  so  purchased.  To  the  net  single  pre- 
mium is  added  the  present  value  of  an  annuity  immediate  of  $2  beginning  at  the 
attained  age.  This  gives  the  premium  rate  at  which  the  paid-up  insurance  is  pur- 
chased. Under  option  four  dividends  become  in  effect  deposits  with  the  Company 
at  interest,  withdrawable  on  any  anniversary  of  the  Policy.  The  Insured  does 
not  lose  the  dividend  by  failing  to  exercise  his  choice,  as  in  that  case  option  three 
takes  effect  automatically.  In  other  words  if  no  choice  is  made  the  Company 
adds  the  value  of  the  dividend  to  the  Policy  in  the  form  of  paid-up  insurance. 
This  is  on  the  assiunption  that  the  Insured  wishes  the  whole  value  of  his  Policy 
to  be  in  the  form  of  insurance— which  course  is  most  advantageous  to  his  estate 
in  case  of  death. 

We  have  now  explained  in  detail  every  provision  of  the  Ordinary  Life  Policy 
except  the  one  last  referred  to— relating  to  dividends.  As  the  method  of  appor- 
tioning surplus  to  Ordinary  Life  Policies  involves  the  business  transacted  under 
other  policy  forms,  we  will  defer  a  discussion  of  this  method  until  other  policy 
forms  are  explained.    We  Avill  noAV  take  up  the 

Limited-Payment  Life  Policy. 

The  following  is  a  copy  of  the  Twenty-Payment  Life  Policy,  as  issued  by 
the  Company  in  1911 : 


♦In  order  to  facilitate  the  payment  of  death-losses,  blanks  to  be  used  in  furnishing  proof 
of  death  are  furnished  the  family  of  the  Insured  by  Branch  Offices  upon  request.  At  the  same 
time  the  Home  Office  is  notified.  Here  the  matter  is  taken  up  by  the  Death-Loss  Division, 
which  immediately  collects  from  the  diffierent  bureaus  all  available  information  respecting  the 
Policy  of  the  Insured  necessary  to  determine  three  things  (1)  whether  or  not  the  Policy  was  in 
force;  (2)  what  amount  is  due  under  it;  (3)  who  are  the  legal  beneficiaries.  This  information 
is  arranged  in  order  in  a  file  awaiting  the  arrival  of  proof  of  death,  when  the  matter  is  at  once 
taken  up  for  completion.  About  8,000  death-losses  are  paid  annually,  involving  in  1910  the 
disbursement  of  over  $23,700,000. 


26 


Studies  in  Practicdl  Life  Insurance 


studies  in  Practical  Life  iH.snrance 


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32 


Studies  in  Practical  Life  Insurance 


1 

■ 

AB  oasaooNB 

3n8*AVd  AAOH 

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REGISTER  OF  CHANGE  OF  BENEFICIARY.                                                    1 

1                                                NOTE.-No  ch.ni<.  d«l«a...on.  or  d«l.r.llon  .b.ll  Uk.  .M«l  until  «Oor,«l  .n  ml.  Policy  b,  Ihc  Comp.oy  .1  Ihe  H«n<  0M1«. '                                               j 

DATE  ENDORSED 

BENEFICIARY 

ENDORSED  BV 

1 

studies  in  Practical  Life  Insurance  33 

The  provisions  of  this  Policy  will  be  found  to  be  exactly  the  same  as  those 
of  the  Ordinary  Life  except  (1)  that  the  annual  premium  is  $383.40,  instead  of 
$281.10,  and  that  instead  of  being  paid  annually  during  life  it  is  to  be  paid  every 
year  during  the  continuance  of  the  Policy  until  premiums  shall  have  been  paid 
for  twenty  full  years,  or  until  the  prior  death  of  the  Insured;  (2)  that  the 
amounts  of  cash  surrender  and  loan  value  and  of  paid-up  insurance  in  the  Table 
on  page  3  are  larger  in  this  Policy,  and  that  the  time  for  which  the  insurance 
will  be  continued,— in  case  the  payment  of  premiums  is  discontinued  after  two 
years'  premiums  have  been  paid—,  is  longer.  We  will  now  examine  into  the 
reason  of  this. 

The  Pjiemium  and  the  Lo.vding. 

It  will  be  noted  that  this  Policy  insures  during  the  whole  period  of  life- 
just  as  the  Ordinary  Life  Policy  does— the  present  value  of  the  net  premiums 
to  be  received  must  therefore  be  the  same  as  in  the  former  case  and  these  values 
are  obtained  in  the  same  way.  The  only  point  that  need  be  discussed  here  is  how 
the  Company  may  realize  these  values  in  twenty  years.  The  present  value 
of  the  insurance  costs  of  $1,000  insurance  taken  at  age  35  or  the  net  single  pre- 
mium, in  that  case  was  found  to  be  $419,883.  In  order  to  get  the  equivalent  of 
this  in  equaL  annual  payments  from  the  living  from  age  35  to  age  55  we  first 
find  the  present  value  of  $1  paid  by  each  person  living  according  to  the 
Mortality  Table  during  the  twenty  years  beginning  at  age  35.  We  begin  with 
$1  each  from  the  81,822  persons  living  at  age  35,  or  $81,822.  At  the  end  of  the 
first  year  $1  would  be  received  from  each  of  the  81,090  persons  then  living,  and 
this  $81,090  would  be  discounted  at  3%  for  one  year.  In  the  same  way  the 
amounts  to  be  received  at  the  beginning  of  the  years  following  would  be  dis- 
counted until  twenty  payments  of  $1  each  had  been  made.  If  we  performed 
these  operations  and  added  together  the  amounts  thus  obtained  w^e  should  have 
a  total  of  $1,150,932,798,  which  is  the  present  value  of  $1  each  received  in  cash 
from  81,822  persons  living  at  age  35  and  of  $1  each  annually  thereafter  from 
the  living  until  twenty  payments  have  been  made.*  But  we  must  have  present 
values  equal  to  81,822  x  419.883  or  $34,355,666,826;  therefore  we  must  have  from 
each  person  annually  for  twenty  years  as  many  dollars  as  1,150,932.798  is  con- 
tained times  in  34,355,666.826.  Performing  the  division  gives  29.85;  therefore 
the  net  annual  premium  to  be  paid  for  twenty  years  is  $29.85  per  $1,000.  As 
the  gross  premium  charged  in  this  Policy  is  $38.34  per  $1,000,  the  loading  is 
$8.49.  The  Ordinary  Life  loading  is  $7.03  or  33  1/3%  of  the  net.  This  net 
premium  is  the  Ordinary  Life  net  premium  plus  $8.77,  which— w^ith  its  loading 
—is 'called  the  "higher  premium  element".  If  we  deduct  the  Ordinary  Life 
loading  from  $8.49  we  have  $1.46,  which  is  16  2/3%  of  $8.77.  In  other  words  the 
loading  on  the  higher  premium  element  is  at  one-half  the  Ordinary  Life  rate. 


*If  we  divide  $1,150,932,798  by  81,822  the  quotient  will  be  $14.06624,  and  this  is  the  present 
value  of  $1  in  cash  and  ?1  per  Einnum  during  nineteen  years  or  until  prior  death,  from  persons 
beginning  at  age  35.  This  is  called  the  present  value  of  a  "Temporary  Annuity  Immediate" 
during  the  period  of  twenty  years.  Tables  have  been  constructed  showing  the  present  value 
of  a  "Temporary  Annuity  Immediate",  beginning  at  any  age  and  continuing  during  any  desired 
period.  Knowing  what  it  means  and  how  it  is  obtained,  we  may  hereafter  take  these  values 
from  such  a  table. 


34  Studies  in  Practical  Life  Insurance 

Verifying  the  Reserves. 

If  we  were  to  eonstiuct  a  table  after  the  manner  of  the  table  on  page  108 
we  should  have  in  the  last  column  the  amount  of  reserve  on  hand  for  each  $1,000 
insured  at  the  end  of  all  the  years  following  age  35.  These  amounts  for  the 
first  ten  years  would  be  as  follows,  omitting  fractional  parts  of  a  dollar: 

First  year     $22  Sixth     year $143 

Second  "       44  Seventh    "    170 

Third     "       68  Eighth      "    197 

Fourth  "       92  Ninth        "    226 

Fifth      •'       117  Tenth        "    255 

While  we  have  taken  these  figures  from  a  Table  of  Terminal  Net  Values,  they 
may  easily  b'?  verified.    For  example, 

l3t  year's  premiums  $29.85  x  81,822 $2,442,386.70 

Add  one  year's  interest  @  STc 73,271.60 

$2,515,658.30 
Deduct    732    death-losses 732,000.00 

$1,783,658.30 

Divide  by  number  of  living  81,090 22.00 

Second  year — 

Amount   on   hand $1,783,658.30 

2d  year's  premiums  81,090  x  29.85 2,420,536.50 

$4,204,194.80 
Add  one  year's  interest  @  3% 126,125.84 

$4,330,320.64 
Deduct  737  death-losses   737,000.00 

$3,593,320.64 
Divide  by  number  of  living  80,353 44.72 

At  the  end  of  the  twentieth  year  the  Insured  will  all  be  age  55  and  their 
policies  will  all  be  paid  in  full,  there  must  then  be  on  hand  for  each  the  net  single 
premium  for  age  55;  and  the  reserve  at  the  end  of  each  year  thereafter  will  be 
the  net  single  premium  for  the  attained  age.  The  reason  is  obvious;  the  net 
single  premium  is  the  amount  of  cash  in  hand  at  any  age  \vhich  will  pay  all 
death-losses  under  policies  issued  at  that  age;  those  who  insure  under  a  twenty- 
payment  life  policy  at  age  35  and  pay  premiums  for  twenty  years  will  pay  no 
more,  but  are  now  insured  for  life  and  will  remain  so.  Hence  at  the  beginning 
of  each  year  thereafter  they  will  be  in  the  same  position  as  that  of  men  newly 
insured  by  the  payment  of  the  net  single  premium. 

We  have  seen  how  the  cost  of  an  insurance  for  the  whole  life  may  be  paid 
for  by  twenty  annual  payments— simply  by  making  the  present  values  of  those 
payments  equal  the  present  value  of  the  insurance.  In  a  similar  manner 
we  may  arrange  to  collect  these  values  in  any  specified  number  of  years. 
Limited-Payment  Life  Policies  are  accordingly  issued  which  are  paid  uj)  by 
either  five,  ten,  fifteen,  twenty,  twenty-five  or  thirty  annual  premiums. 


studies  in  Practical  Life  Insurance  .35 

KrFKCT  OK  Tin:  TiAKci-.K  I\f:sekvi;s. 

We  will  iiuw  examine  the  Table  of  Loan  and  Surrender  Values  on  page  3 
of  the  Policy.  If  we  compare  the  figures  in  Column  1  with  the  reserves  already 
given  we  shall  have  the  following,  omitting  fractional  i)arts  of  the  dollar: 


End  of  Year 

rieserve 

Ca 

sh  Value 

Surrender  charge 

2  

$44  

$29 

$15 

3  

68  

13 

4 

92 

79  

13 

5  

117  

107 

10 

6 

143  

133  .  . . 

10 

7  

170  

162  

8 

8 

197 

192 

5 

9  

226  

223  

3 

10  

255 

255 

0 

The  cash  value  at  the  tenth  year  and  thereafti^-  is  the  full  reserve,  omitting 
fractional  parts  of  the  dollar. 

As  we  have  observed  in  considering  the  Ordinary  Life  Policy,  the  law 
does  not  require  a  surrender  value  of  any  kind  until  three  years'  premiums 
have  been  paid;  the  company  allows  approximately  one-half  of  the  reserve 
as  such  value  after  two  years'  premiums  have  been  paid  under  the  Ordinary 
Life  Policy  and  66%  under  this  Policy.  The  surrender  charge  under  each 
Policy  at  the  third  year  Is  approximately  20%  of  the  reserve  and  diminishes 
until  it  reaches  nothing  at  the  tenth  year.  The  decline  is  however  more  rapid 
under  the  higher  premium  Policy,  for  the  reason  that  the  reserve  is  larger  in 
proportion  to  the  insurance.  The  sui'ivnder  charges  have  the  followino'  ratios  to 
the  reserves : 

Year  Ordinary  JAfc  Pol.  20  Pay't  Life  Pol. 

3    17.9';     19.1% 

4    17.09^     14.1% 

5    14.7^;     8.5% 

6  .  .  .  : 12.2%    7.0% 

7    8.2%    4.7% 

8    4.4%    2.5% 

9    1.6%    1.3% 

If  we  compare  these  surrender  charges  both  with  respect  to  the  amount 
per  $1,000  insured  and  the  percentage  of  the  reserve,  with  the  surrender 
charges  allowed  by  law — as  we  did  those  of  the  Ordinary  Life  Policy — we  shall 
find  they  are  always  smaller  than  the  legal  allowances. 

The  onl}^  point  requiring  special  explanation  is  the  manner  of  ascertaining 
the  surrender  charge  under  the  ^Massachusetts  law,  which  is  "5%  of  the  present 
value  of  all  the  net  premiums  which  by  its  terms  the  Policy  is  exposed  to  pay." 
At  the  end  of  three  years  "The  Policy  is  exposed  by  its  terms  to  pay"  net 
premiums  of  $29.85  for  17  years,  hence  we  must  use  for  the  multiplier  not  the 
present  value  of  $1  paid  annually  during  life — as  in  the  case  of  the  Ordinary 
Life  Policy — that  is  to  say  the  "Annuity  Immediate" — nor  the  present  value 
of  $1  paid  during  twenty  years  or  until  death,  if  prior,  that  is  the  "Temporary 


30  Studies  in  Practical  Life  Insurance 

Annuity  Immediate" — 20  years,  age  35, — but  the  "Temporary  Annuity  Imme- 
tliate" — 17  years,  age  38,  which  we  may  obtain  from  the  table  which  we  have 
already  learned  how  to  construct.  This  value  is  $12,554.  :Multiplying  this  by 
the  net  annual  premium  gives  $374.74,  5%  of  which  is  $18.74,  the  maximum 
surrender  charge  allowed  by  the  Massachusetts  law  under  this  Policy  at  the 
end  of  the  third  year.  In  the  same  manner  we  may  find  that  it  will  always  be 
greater  than  the  surrender  charge  made  in  the  Policy. 

The  amount  of  paid-up  insurances  shown  in  column  2,  and  the  time  during 
which  the  full  amount  of  the  insurance  will  be  continued,  in  case  the  payment 
of  premiums  is  discontinued,  may  be  verified  in  the  same  manner  as  under  the 
Ordinary  Life  Policy — no  new  principles  are  involved. 

The  Instalment  Table  is  the  same  as  in  the  Ordinary  Life  Policy. 

Prior  to  the  introduction  of  non-forfeiture  conditions  practically  the  only 
forms  of  Policy  issued  were  the  Ordinary  Life  and  the  Term  Policy,  the  latter 
being  a  Policy  which  onlj^  undertook  to  insure  during  a  limited  period.  The 
reason  is  obvious:  Limited-Payment  Life  premiums  are  necessarily  higher  and 
no  one  would  be  willing  to  risk  the  forfeiture  of  the  larger  values  in  case  of 
a  forced  discontinuance  of  premium  payments.  But  with  non-forfeiture  con- 
ditions in  the  Policy  and  correspondingly  larger  values  allowed  upon  lapsed 
Policies,  the  advantage  of  paying  up  a  Policy  within  a  limited  time  appealed 
to  would  be  insurers.  The  first  non-forfeiting  Policies  were  all  of  the  Limited- 
Payment  variety — either  life  or  endowment.* 

We  will  now  consider  the 

T-^^nty-Year  Endowment  Policy. 

The  following  is  a  copy  of  this  form  of  Policy  as  issued  by  the  New-York 
Life  Insurance  Company  in  1911  (see  page  38)  : 

The  text  of  this  Policy  will  be  found  the  same  as  that  of  the  life  policies 
already  discussed  except  (1)  that  it  is  made  payable  in  cash  to  the  Insured  at 
the  end  of  twenty  years,  if  he  be  then  living,  and  to  the  Beneficiary  on  proof  of 
death  prior  to  the  end  of  the  twenty  years;  (2)  that  the  premium  is  $519.10 
annually  for  twenty  years;  (3)  that  the  "Privilege  of  Change  to  Other  Forms 
of  Policies"  is  omitted,  as  it  is  not  necessary;  and  (4)  that  the  Table  of  Loan 
and  Surrender  Values  on  page  three  is  different. 

Computing  the  Premium  for  Insurance. 

We  will  first  consider  the  premium  rate.  It  is  obvious  that  we  now  have  a  prob- 
lem somewhat  different  from  those  which  preceded.  It  isn't  a  question  now  of 
providing  for  insurance  during  life,  but  only  for  a  term  of  yoai-s;  and  there  is 
tlie  added  problem  of  providing  for  payment  of  the  face  of  the  Policy  at  the 
end  of  twenty  years.  If  we  turn  to  the  Mortality  Table  we  shall  find  that  of 
the  81,822  persons  living  at  age  35,  17,259  will  die  during  the  next  twenty 
years  and  64,563  will  be  living  at  age  55 ;  our  problem  therefore  is  to  provide  an 
insurance  of  $1,000  each  for  the  17,259  to  be  paid  as  they  die,  and  $1,000  each 


•See  S.   C.   H.,  pages  58-C2. 


Studies  in  Practical  Life  Insurance  37 

twenty  years  hence  for  the  64,563  who  will  survive,  and  then  to  apportion  the  cost 
in  equal  annual  payments  to  the  living. 

First  w^e  Avill  ascertain  the  present  value  of  an  insurance  of  $1,000  for 
twenty  years  upon  the  lives  of  each  of  81,822  persons.  We  begin  as  in  the  case 
of  the  Ordinary  Life  Policy.  The  number  dying  during  the  first  year  is  732, 
and  $732,000  must  be  paid  at  the  end  of  the  first  year,  the  preseftt  value  of  which 
is  $710,679,768.  Deaths  in  the  second  year  will  be  737  and  the  present  value 
of  $737,000  due  tw^o  years  hence  is  $694,693,252.  In  the  same  manner  we  may 
obtain  the  present  values  of  the  insurances  to  be  paid  at  the  end  of  each  of  the 
twenty  years.  If  we  were  to  perform  all  these  operations  and  take  the  sum  of 
the  results  we  would  have  $12,553,331.24  as  the  present  value  of  these 
insurances.*  How  much  must  the  living  pay  annually  to  make  equivalent 
values  ?  We  first  find  the  present  value  of  $1  per  year  from  each,  the  first  dollar 
to  be  paid  at  once.  This  gives  the  series  of  the  number  living  multiplied  by  $1 
and  the  amounts  discounted  thus : 

$81,822   paid   in   cash $81,822.00 

$81,090   discounted  for  one  year 78,728.173 

$80,353  discounted  for  two  years 75,740.416 

etc.,  etc. 

If  we  complete  the  series  we  shall  have  $1,150,932.80  as  the  present  value 
of  $1  per  year  from  each  of  the  living  for  tw^enty  years.  We  get  the  same 
result  by  multiplying  81,822  by  $14.06624,  the  value  of  a  Temporary  Annuity 
Immediate  for  20  years  at  age  35.  But  the  present  value  of  the  insurances  for 
twenty  years  is  $12,553,131.24,  therefore  each  must  pay  as  many  dollars  annually 
as  1,150,932.80  is  contained  times  in  12,553,131.24.  Performing  the  division  we 
get  10.907,  hence  the  net  annual  premium  for  a  Term  Insurance  of  $1,000  for 
twenty  years  beginning  at  age  35  is  $10.91. 

Computing  the  Premium  for  Endowment. 

The  present  value  of  64,563  endowments  of  $1,000  each  due  in  20  years  is 
$64,563,000  discounted  for  twenty  years  (64,563,000  x  .553676)  or  $35,746,- 
983.59.  t  We  have  already  found  that  $1  annually  from  each  of  the  living  for 
twenty  years  wnll  produce  present  values  equal  to  $1,150,932.80;  hence  to  pro- 
duce the  required  amount  each  must  pay  annually  as  many  dollars  as  1,150,- 
932.80  is  contained  times  in  35,746,983.59.  Performing  the  division  we  get 
31.059,  hence  the  net  annual  cost  of  the  endowments  will  be  $31.06.  But  since 
each  man  wishes  the  insurance  if  he  dies  and  the  endowment  if  he  survives,  they 
may  be  combined  in  the  same  contract  by  paying  the  cost  of  both.     Adding 


♦If  we  divide  this  sum  by  the  number  of  the  living  at  age  35  we  shall  get  $153.42  the 
amount  of  cash  in  hand  from  each  necessary  to  provide  an  insurance  of  $1,000  for  twenty 
years  beginning  at  age  35.  This  is  the  Net  Single  Premium  for  a  Term  Insurance  of  twenty 
years  at  age  35. 

flf  we  divide  this  number  by  the  total  number  living  at  age  35,  we  will  get  $436.89,  and 
this  is  the  amount  which  each  would  need  to  pay  in  cash  for  an  endowment  of  $1,000  each  to 
the  living  twenty  years  hence.  This  is  therefore  the  net  single  premium  for  a  20-year  Pure 
Endowment  taken  at  age  35. 


38 


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Studies  in  Practical  Life  Insurance  41 


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Studies  in  Practical  Life  Insurance 


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Studies  in  Practical  Life  Insurance 


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44 


Studies  hi  Practical  Life  Insurance 


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REGISTER  OF  CHANGE  OF  BENEFICIARY. 

NOTB.-No  chingl.  def HlMtlon .  or  decl.r.tlon  .hall  t.k.  tiled  until  endoraed  on  thl>  Policy  by  the  Company  .t 

he  Home  Office. 

DATE  ENDORSED 

BENEFICIARY 

ENDORSED  BY 

1 

! 

11 

studies  iti  F radical  Life  Insurance  45 

together  the  net  annual  costs  we  have  ($10.91  +  $31.06)  $41.97  as  the  net  annual 
premium  for  a  twenty-year  endowment  insurance  of  $1,000  taken  at  age  35.* 

The  gross  annual  premium  on  this  Policy  is  $51.91  per  $1,000,  the 
h)ading  is  therefore  $9.94.  If  Ave  deduct  the  Ordinary  Life  Loading  for  same 
age— as  in  case  of  the  Limited-Payment  Life  Policy— we  have  $9.94  less 
$7.03  =  $2.91.  The  excess  of  this  net  premium  over  that  of  the  Ordinary  Life 
rate  at  same  age  is  ($41.97 —  $21.08)  $20.89.  The  excess  loading  is  therefore 
practically  14%  of  the  excess  premium.  The  question  arises— why  is  not  the 
same  rule  followed  as  before  ?  The  answer  is— such  was  formerly  the  custom, 
but  under  the  Wisconsin  law  of  1907  no  life  company  may  do  business  in  that 
State  if  its  loadings  on  Endowment  Policy  premiums  exceed  one-third  of  the 
net  premiums  on  Limited-Payment  Life  Policies  paid-up  by  a  corresponding 
number  of  premiums.  We  have  already  seen  that  the  net  annual  premium  for 
a  20-Payment  Life  Policy  at  age  35  is  $29.85,  therefore  the  loading  of  a  20-Year 
Endowment  Policy  at  that  age  may  not  exceed  $9.95. 

Table  of  Loan  and  Surrender  Values. 

If  we  were  to  make  up  a  table  from  the  net  premium  on  this  Policy— show- 
ing premiums  received,  interest  received  and  death-losses  paid  until  the  end  of 
twenty  years— as  in  the  case  of  the  Ordinary  Life  Policy— we  should  have  in 
the  last  column  amounts  representing  the  reserve  fund  on  hand  per  $1,000 
insured  at  the  end  of  each  year.  These  amounts  are  used  in  case  of  discontinu- 
ance of  the  payment  of  premiums— as  in  each  of  the  preceding  policies— in  one 
of  three  ways,  at  the  option  of  the  Insured,  and  if  no  choice  is  made  they  are 
applied  automatically  to  do  as  nearly  as  may  be  what  the  Insured  originally 
set  out  to  do.  First  let  us  see  if  the  Company  is  complying  with  the  law  as  to 
the  surrender  charge.  We  give  below  a  table  showing  (1)  the  reserve  at  the 
end  of  each  year,  (2)  the  cash  surrender,  or  loan  value,  (3)  the  surrender  charge. 


Reserve 

Cash  Value 

Surrender  charge 

9 

$70  

$55  

$15 

3  

4  

107   .... 

92  

15 

145  

133  

12 

185  

226  

175  

10 

6  

216 

10 

269  

262 

( 

8  

313  

308  

0 

9  

10  

359  

407  

2 

407  

0 

Although  the  law  does  not  require  any  value  to  be  given  until  three  years' 
premiums  have  been  paid,  the  Company  allows  nearly  80%  of  the  reserve  at 
the  end  of  the  second  year.  At  the  third  year  the  surrender  charge  is  $15  per 
$1,000    (14^;    of   the   reserve),    and   after   that   it   declines   to   0.     As   all   the 

*In  insurance  text-books  the  insurance  part  of  this  contract  is  called  Term  Insurance,  and 
the  endowment  part  Pure  Endowment.  When  combined  they  make  an  Endowment  Insurance; 
but  Pure  Endowments  are  so  seldom  issued,  except  in  connection  with  an  insurance  for  the 
same  period  that  such  a  policy  is  usually  spoken  of  simply  as  an  Endowment  Policy.  Having 
learned  how  the  net  single  premium  and  the  net  annual  premiums  are  obtained  both  for  Term 
Insurances  and  for  Pure  Endowments,  it  is  now  to  be  noted  that  such  premiums  for  many 
ages  and  for  many  periods  have  been  carefully  calculated  and  are  available  in  tables,  which 
we  may  have  occasion  later  to  consult. 


46  Studies  in  Practical  Life  Insurance 

States  having:  laws  on  the  subject— except  Massachusetts— allow  a  surrender 
charge  of  at  least  $25  per  $1,000  insured  or  of  207o  of  the  reserve,  it  only 
remains  to  ascertain  if  ' '  five  per  cent,  of  the  present  value  of  all  the  net  premiums 
which  the  policy  is  by  its  terms  exposed  to  pay",  is  ever  less  than  $15.  In  the  case 
of  the  20-Fayment  Life  Policy  we  found  that  the  highest  surrender  charge  allowed 
at  the  end  of  the  third  year,  when  the  net  premium  was  $29.85  was  $18.74.  With 
a  net  premium  in  this  case  of  $41.97,  and  the  other  factors  the  same,  the  sur- 
render charge  allowable  would  be  found  by  the  following  proportion : 

29.85  :  18.74  :  :  41.97  :  answer. 
In  short  it  would  be  greater  than  $18.73,  hence  the  surrender  charge  here  is 
less  than  the  law  allows. 

Paid-up  Endowment  Insurance.— Haixing  settled  upon  the  amounts  in  hand 
at  the  end  of  various  years,  it  now  remains  to  be  seen  what  these  amounts  will 
purchase,  first — in  endow^ment  insurance  due  at  the  end  of  eighteen,  seventeen, 
sixteen,  etc.,  years.  We  have  already  seen  how  the  net  single  premiums  may 
be  calculated  for  any  age  and  any  period,  and  so  we  may  take  what  we  now 
require  from  the  tables  which  are  accessible  in  print.  By  reference  to  such  a 
table  we  find  the  net  single  premium  per  $1,000  for  an  18-year  term  insurance 
at  age  37  is  $147.17,  and  that  the  net  single  premium  at  age  37  for  a  pure  endow- 
ment due  eighteen  years  hence  is  $471.97.  The  sum  of  the  two  is  $619.14,  and 
this  will  purchase  at  age  37,  an  endowment  insurance  of  $1,000  due  at  age  55 
or  at  prior  death.  Going  to -market  with  $55  in  our  purse,  hoAv  much  can  we 
buy  at  this  rate  ?  We  have  the  proportion : 
619.14  : 1,000  :  :  55  :  the  answer. 

Performing  the  operations  required  we  get  $88.83,  and  the  Policy  says  $89. 
The  other  amounts  of  paid-up  endowment  insurance  may  be  verified  by 
similar  calculations. 

But  when  we  get  to  market  we  may  conclude  to  expend  our  $55  in  the  pur- 
chase of  a  temporary  insurance  of  $1,000.  How  long  will  this  amount  carry 
the  insurance?  Here  we  follow  the  same  method  as  explained  under  the  Ordinary 
Life  Policy.  We  ascertain  the  cost  of  $1,000  insurance  for  each  year,  beginning 
with  age  37,  adding  them  together  as  we  go  along,  until  the  difference  between 
the  sum  and  $55  is  less  than  the  cost  of  the  next  year's  insurance.  Then  the 
balance  is  used  to  buy  insurance  for  as  many  months  as  it  is  twelfths  of  the 
''cost  of  insurance  for  that  year. 

If  we  used  the  tables  we  would  note  the  cost  of  term  insurance  at  age  37 
for  one  year,  two  years,  etc.,  until  we  came  to  an  amount  greater  than  $55.  The 
amount  preceding  this  would  be  the  cost  of  the  full  years'  insurance,  the  balance 
would  be  applied  as  before  explained  to  obtain  the  number  of  months  additional. 
At  the  end  of  the  fifth  year  we  shall  find  that  we  have  enough  to  pay  for  the 
insurance  for  fifteen  years  and  have  a  little  money  left  ($39.17)  and  with  that 
we  would  purchase  a  pure  endowment  due  fifteen  years  lience.  To  a.scertain 
how  much  it  would  be  we  would  either  calculate  the  net  single  premium  for  a 
pure  endowment  for  $1,000  1;il<<'ii  ;it  age  40  and  due  fifteen  years  hence,  or  take 
th^  .'uiioiint  fnnii  tlio  1;iltl.'s.     We  stioiild  find  tliis  to  be  $530.57.    We  would  then 


studies  in  Practical  Life  Insurance  47 

have  the  proportiou  530.57  :  1000  : :  :i!).17  :  nnswcr.  Performing  the  opera- 
tion we  get  73.82. 

The  Instahiient  Tables  are  the  same  as  in  the  Ordinary  Life  Policy. 

We  have  now  learned  how  to  find  the  net  single  and  the  net  annual  premium 
both  for  term  insurance  and  for  a  pure  endowment,  at  different  ages  and  for 
different  periods.  Endowment  Insurance  Policies  are  issued  with  10,  15,  20,  25, 
30,  35  or  40  year  periods,  and  the  net  single  and  net  annual  premiums  are  found 
by  adding  together  the  cost  of  their  two  component  parts. 

Summary  of  the  Discussion. 

Reviewing  the  ground  we  have  gone  over,  we  find  that  Life  Insurance  pro- 
ceeds upon  the  following  assumptions  and  demonstrations : 

1.  A  standard  mortality  table  expresses  with  a  reasonable  degree  of  accu- 
racy the  death-rate  which  may  be  expected  among  a  large  number  of  lives  at  each 
age  of  adult  life.  Knowing  the  death-rate  at  each  age  we  may  compute  the  cost 
of  insuring  against  the  contingency  of  death  during  any  year  of  life. 

2.  This  cost  increases  from  year  to  year  until  it  reaches  100%  of  the  insur- 
ance; but  the  cost  of  a  whole  life  insurance  may  be  paid  for  by  equal  annual 
payments,  either  during  whole  life  or  during  a  fixed  period,  by  making  the 
present  value  of  such  payments  equal  to  the  present  value  of  the  insurance. 
As  the  cost  of  insurance  is  an  increasing  cost,  if  it  is  paid  for  by  equal  annual 
payments,  such  payments  in  the  earlier  years  of  the  insurance  will  be  greater 
than  the  current  cost  of  the  insurance,  and  in  the  later  years  less  than  the  cur- 
rent cost;  the  overpayments  of  the  early  years  must  therefore  be  accumulated 
at  compound  interest  at  the  rate  assumed  in  computing  the  present  value  of 
the  insurance  and  the  present  value  of  the  payments  to  be  made  therefor. 

3.  These  accumulations  are  fixed  with  mathematical  accuracy  by  the  mor- 
tality table  and  the  rate  of  interest  assumed  in  computing  the  present  value  of  the 
insurance  and  the  present  value  of  the  annual  payments  to  be  made,  therefor ; 
they  are  always  equal  to  the  difference  between  the  present  value  of  the  insur- 
ance and  the  present  value  of  the  payments  yet  to  be  made ;  the  accumulations 
on  each  Policy  continue  to  increase  from  year  to  year  as  long  as  the  Policy 
remains  in  force,  or  until  the  Insured  reaches  the  age  at  which  the  mortality 
table  used  in  computing  them  ends,  when  they  become  equal  to  the  insurance. 

4.  These  accumulations  constitute  the  Policy  reserves  of  the  insuring  com- 
pany ;  they  are  an  essential  part  of  the  provision  made  for  the  ultimate  payment 
of  the  policies  at  maturity,  and  are  a  part  of  such  payment ;  they  are  the  basis 
of  the  Policy  guarantees  respecting  cash  surrender  value  and  paid-up,  and  ex- 
tended insurance,  in  case  the  annual  payments  by  the  Insured  are  discontinued ; 
the  holding  of  reserves  is  by  the  law  of  the  State  necessary  to  the  solvency 
of  the  insuring  company. 

5.  The  annual  payments  computed  as  above  upon  certain  rates  of  mor- 
tality and  interest  to  provide  for  death-losses  are  called  net  annual  premiums; 
the  expenses  of  administration  are  provided  for  by  an  addition  to  the  net 


48  Studies  in  Practical  Life  Insurance 

annual  premium  called  the  loading ;  the  loading  is  supposed  to  provide  for  all 
other  contingencies  including  unexpected  losses  and  to  be  sufficient,  in  the 
case  of  policies  participating  in  the  surplus  of  the  Company,  to  provide  for 
certain  returns  in  the  form  of  dividends;  the  sura  of  the  net  premium  and  the 
loading  is  called  the  gross  premium,  or  the  office  premium,  and  this  is  the 
premium  Avritten  in  the  Policy  as  the  consideration  for  the  insurance  contract. 

6.  In  the  case  of  an  Endowment  Policy,  provision  is  made  in  the  net 
premium  for  the  present  value  of  the  insurance  during  a  fixed  period  and  for 
the  present  value  of  an  endowment  of  equal  amount  in  case  the  insured  survives 
until  the  end  of  the  period.  These  present  values  are  separately  computed  and 
the  sum  of  the  net  premium  for  the  insurance  and  the  net  premium  for  the 
endowment  is  the  net  premium  for  an  endowment  insurance.  To  this  net  pre- 
mium is  added  a  charge  called  the  loading  for  expenses,  taxes  and  contingencies 
and,  in  the  case  of  the  New- York  Life,  for  dividends,  and  the  sum  is  the  gross,  or 
office  premimn,  written  in  the  Policy  as  the  consideration  for  the  contract  of 
endowment  insurance. 

7.  The  same  conditions  as  to  overpayment  and  accumulation  obtain  under 
endowment  policies  as  under  whole  life  policies,  until  the  end  of  the  endowment 
period. 

8.  While  the  net  premiums  -with  interest  are  intended  to  be  sufficient  to 
provide  for  all  death-losses  and  endowments,  and  while  the  loadings  are  intended 
to  be  sufficient  to  provide  for  all  other  expenditures,  yet  their  computation  only 
marks  the  several  steps  taken  to  ascertain  the  gross  premium,  in  consideration  of 
which  the  Company  undertakes  the  contract.  The  gross  premiums  and  all  other 
items  of  income  go  into  a  common  fund  from  which  all  disbursements  are  made. 
While  the  law  takes  account  of  the  component  parts  of  the  gross  premium  in 
determining  a  limit  for  expenses,  it  does  not  require  that  these  component 
parts  shall  be  used  for  the  specific  purposes  had  in  view  in  their  computation. 
On  the  contrary,  it  specifically  provides  that  certain  assumed  mortality  gains 
and  certain  gains  from  lapses  may  be  used  in  acquisition  expenses,  and  that 
a  contingency  reserve  may  be  built  up  within  certain  limits  by  savings  or  sur- 
plus from  any  source  whatsoever.  This  surplus  is  available  for  any  needs  of 
the  Company.  In  short,  a  life  company  undertakes,  with  the  money  it  receives 
from  all  sources,  to  carry  out  its  contracts  in  accordance  with  the  provisions  of 
law  under  which  it  operates. 

In  the  following  chapter  we  shall  show  how  the  assumptions  of  mortality, 
interest,  loading,  expenses  of  administration,  etc.— which  find  place  in  the  gross 
premium  — are  adjusted  to  the  facts  as  they  find  expression  in  the  actual  experi- 
ence of  the  Company. 


CHAPTER  II. 

APruUTJUNxMENT  i)V  SlUrLUS. 

Legal  Requirements. 

The  three  representative  Policies  which  we  have  considered  in  the  fore- 
going chapter  provide  that  they  shall  participate  in  the  surplus  of  the  Com- 
pany, and  that  the  proportion  of  surplus  accruing  to  each  shall  be  ascer- 
tained and  distributed  annually  and  not  otherwise.  The  latter  clause  is  the 
language  of  the  statute  of  the  State,  which  provides  further  that  the  surplus 
earned  shall  be  ascertained  as  soon  as  may  be  practicable  after  December  31  of 
€ach  year ;  that  after  setting  aside  from  such  surplus  such  sums  as  may  be  required 
(1)  for  the  paj^ment  of  authorized  dividends  upon  capital  stock  (in  the  case 
of  companies  having  capital  stock)  and  (2)  of  such  sums  as  may  properly  be 
held  for  account  of  existing  deferred  dividend  policies,  and  (3)  for  a  contin- 
gency reserve  not  in  excess  of  the  amount  prescribed  in  the  same  article, — the 
remainder  shall  be  apportioned  to  all  other  policies  entitled  to  share  therein.* 

It  will  be  seen  that  the  determination  of  the  surplus  to  be  equitably  appor- 
tioned to  a  single  annual  dividend  policy  involves  a  consideration  of  the  entire 
business  operations  of  the  Company  for  the  year.  We  must  not  be  surprised 
therefore  if  our  study  takes  us  over  a  good  deal  of  ground.  But  we  should  bear 
in  mind  that  our  purpose  is  not  so  much  to  determine  the  amount  of  the  annual 
dividend  as  it  is  to  study  the  methods  by  which  it  is  arrived  at.  So  let  us  go 
forward  patiently  step  by  step. 

The  normal  sources  of  surplus  in  life  insurance  are  four : 

1.  An  expense  rate  lower  than  that  provided  in  the  loading; 

2.  A  death-rate  lower  than  that  provided  for  in  the  net  premium ; 

3.  An  interest  rate  higher  than  that  assumed  in  calculating  the  premium 
(this  rate  including  net  profits  on  investments)  ; 

i.  Excess  of  Policy  reserve  on  Policies  discontinued,  over  the  returns  made 
on  such  Policies. 

Before  a  dividend  can  be  paid  on  a  life  Policy  the  following  items  must  be 
provided  for:  (a)  the  Policy's  share  of  the  expenses  of  the  Company;  (b)  the 
Policy's  share  of  the  death-losses;  (c)  the  Policy's  legal  reserve  at  the  end  of 
the  year;  and  (d)  such  contributions  to  the  contingency  reserve  as  may  be  judged 
necessary  and  proper  by  the  Trustees  of  the  Company.  .  As  these  various  factors 
are  in  a  large  degree  prescribed  by  law,  it  will  be  necessary  before  entering 
upon  an  examination  of  the  sources  of  surplus  from  which  these  dividends  were 
•derived,  to  examine  the  provisions  of  law  which  direct:  (1)  how  expenses  are  to 
be  limited  and  apportioned;  (2)  what  rate  of  mortality  may  be  assumed;  (3) 
what  reserves  may  he  held  at  the  end  of  various  years  and  what  mnst  be  held: 
and  (4)  how  a  contingency  reserve,  or  unappropriated  surplus,  may  be  built  up 
and  maintained  within  certain  maxinunn  limits. 


►Insurance  Law,  Sec.  83. 


50  Studies  in  Practical  Life  Insurance 

Limitation  of  Expenses. 

We.  have  seen  that  the  provision  made  in  the  premium  for  expenses  and 
contingencies— the  loading— is  the  same  in  all  years  during  the  premium- 
paying  period.  But  the  expense  of  inducing  people  to  apply  for  life  insur- 
ance policies  is  very  much  greater  than  the  expense  of  caring  for  the  policies, 
and  this  greater  expense  is  all  incurred  in  the  first  year.  Agents'  first  year's 
commissions,  the  cost  of  medical  examination  and  of  inspection  and  other 
expenses  connected  with  the  acquisition  of  new  business,  exceed  the  loading 
in  the  first  year's  premium.  One  of  the  most  serious  problems  of  life  insurance 
management  has  been  the  proper  apportionment  of  first  year's  expenses. 

As  the  mortality  is  much  less  than  the  normal  during  the  first  five  years, 
it  is  advantageous  to  a  life  company  to  secure  new  business  even  at  an  outlay 
greater  than  the  loading.  The  law  takes  account  of  this  and  makes  a  distinc- 
tion between  the  expense  allowable  in  the  first,  and  in  subsequent,  years  of 
insurance  as  follows: 

First  year's  expenses  must  not  exceed  (a)  the  loadings  upon  first  year's 
premiums,  plus  (b)  the  present  values  of  the  assumed  mortality  gains  for  the 
first  five  years  of  insurance  on  policies  in  force  at  the  end  of  the  calendar  year, 
as  ascertained  by  the  select  and  ultimate  method  of  valuation  as  provided  in 
section  84,  plus  (c)  the  gross  premiums  on  policies  issued  and  terminated 
during  the  year  less  the  net  cost  of  insurance  while  in  force. 

Renewal  commissions  and  collection  fees  are  limited— (a)  on  endowment 
policies  payable  by  less  than  twenty  annual  premiums— to  five  per  cent,  for 
fourteen  years;  (b)  on  other  forms  of  policies— to  seven  and  one-half  per  cent, 
for  nine  years  and  five  per  cent,  for  the  next  five  years;  (c)  on  all  policies  after 
the  first  fifteen  years— to  a  collection  fee  not  exceeding  three  per  cent. 

Total  expenses  are  limited  to  (a)  total  loading  on  premiums  received,  plus 
(b)  assumed  mortality  gains,  plus  (c)  an  amount  for  investment  expenses  not 
exceeding  one-fourth  of  one  per  cent,  on  mean  invested  assets,  plus  (d)  real 
estate  taxes  and  other  outlays  exclusively  on  real  estate.* 

Assumed  INIortality  Gains. 

The  "assumed  mortality  gains"  spoken  of  in  connection  with  the  expenses 
on  new  business  will  be  understood  from  the  following  resume  of  section  84,  on 
Valuation  of  Policies:  The  Superintendent  shall  make  annually  valuations  on 
the  net  premium  basis  of  the  poJicy  contracts  of  all  companies  doing  business 
in  the  State.  The  legal  minimum  standard  for  contracts  issued  prior  to 
January  1,  1901,  shall  be  the  Actuaries'  Table  of  Mortality  with  interest  at 
47o  per  annum;  and  for  contracts  issued  after  that  day  the  American  Table 
with  interest  at  Sy^Vc,  provided  that  the  legal  minimum  valuation  of  all  con- 
tracts issued  on  or  after  January  1,  1907,  shall  be  in  accordance  with  the  select 
and  ultimate  method,  and  on  the  basis  that  the  rate  of  mortality  during  the 
first  five  years  after  the  issuance  of  the  said  contracts  respectively  shall  be 
calculated  according  to  the  following  percentages  of  the  rates  shoAvn  by  the 


•For  the  full   text  of  Section   97— Limitation  of  Expenses— see   Appendix,   page   12S. 


Studies  in  Practical  Life  Insurance  51 

American  Table,  to  wit,  first  insurance  year  50%,  second  year  65%,  third  year 
75%.  fourth  year  85%,  fifth  year  95%.  The  superintendent  may  vary  the 
standards  of  interest  and  murtality  in  the  case  of  corporations  from  foreign 
countries  as  to  contracts  issued  in  other  countries  than  the  United  States;  and 
ill  particular  cases  of  invalid  lires  and  other  extra  hazards. 

The  legal  minimum  standard  for  the  valuation  of  annuities  issued  after 
January  1,  1907,  shall  be  McClintock's  "Tables  of  Mortality  Among  Annui- 
tants", with  interest  at  3i/^%,  but  annuities  deferred  ten  j^ears  or  more  and 
written  in  connection  with  life  or  term  insurance*  shall  be  valued  on  the  same 
mortality  table  from  which  the  consideration  of  premiums  were  computed  with 
interest  not  higher  than  31^%. 

Any  life  insurance  company  may  voluntarily  value  its  Policies  or  any  class 
thereof,  according  to  the  American  Experience  Table  *  *  *  *  at  a  lower  rate  of 
interest  than  that  prescribed,  but  not  lower  than  3%,  and  with  or  ivithout  ref- 
erence to  the  select  and  nltimate  method  of  valuation,  and  in  every  such  case 
shall  report  any  excess  of  its  valuations  over  those  computed  by  the  legal  mini- 
mum standard  and  also  the  standards  used  by  it  in  making  the  same,  and  if  such 
other  standards  are  adopted  they  shall  not  be  abandoned  without  the  written 
consent  of  the  Superifitendent  of  InsuranceA 

Particular  attention  is  called  to  the  matter  in  italics,  because  the  New-York 
Life  varies  its  standard  in  the  case  of  sub-standard  lives,  lives  insured  in  tropical 
and  sub-tropical  countries,  and  uses  the  American  Table  of  Mortality  with  3% 
interest  in  calculating  the  reserves  on  the  Policies  now  under  consideration,  but 
does  not  avail  itself  of  the  abatement  in  the  reserves  allowed  by  the  select  and 
ultimate  method  at  the  end  of  the  first,  second,  third  and  fourth  years. 

A  condensed  statement  of  Section  87,  relating  to  contingency  reserve,  or 
unappropriated  surplus,  is  as  follows :  A  domestic  life  company  may  accumulate 
and  maintain,  in  addition  to  the  net  value  of  its  policies  computed  according  to  the 
standard  adopted  by  it  under  Section  84,  a  contingency  reserve  not  exceeding 
the  follow^ing  percentages :  The  largest  percentage  is  20%  or  $10,000.  whichever 
is  greater — when  net  values  of  its  Policies  are  $100,000  or  under.  The  per- 
centage decreases  as  net  values  increase  until  the  minimum  of  five  per  cent, 
is  reached  when  net  values  exceed  seventy-five  million  dollars.  Accumulations 
held  on  account  of  deferred  dividend  policies  are  not  considered  as  a  part  of  the 
contingency  reserve. 

The  Select  and  Ultimate  Method  of  Yalu.vtion. 

The  select  and  ultimate  method  of  valuation  is  an  attempt  to  fix  the  maxi- 
mum amount  that  may  safely  be  expended  by  a  life  company  for  new  risks  in 
excess  of  the  first  year's  loading — in  view  of  the  lower  mortality  of  such  risks 
during  the  first  five  years  of  insurance.  It  allows  a  company  to  expend  during 
the  first  year  the  present  value  of  these  assumed  mortality  gains,  and  to  hold 
a  smaller  reserve  per  $1,000  at  the  end  of  the  first,  second,  third  and  fourth 
years  of  insurance.     The  method,  according  to  its  author.  Mr.  Miles  iMenander 


*Such  as  we  have  already  considered  in  the  payment  of  life  and  endowment  policies. 
•j-For  the  full  text  of  Section  84.  see  Appendix,  page  120. 


b'l 


Studies  in  Practical  Life  Insurance 


Dawson,  "charges  the  company  with  its  actual  liability,  as  nearly  as  possible, 
allowing  for  selection.  The  effect  of  it,  as  compared  with  the  full  net  premium 
reserves  by  the  usual  formula,  is  to  allow  the  gains  from  mortality  during  the 
first  five  years  as  an  offset  to  the  initial  expense  incurred  in  securing  those  fresh 
lives  *  *  *  After  the  fifth  year  the  reserves  *  *  *  *  are  the  full  net  premium 
reserves  by  the  usual  formula. '  '* 

As  the  net  premium  is  calculated  upon  the  assumption  that  the  full  table 
rate  of  mortality  will  be  experienced  and  the  full  reserves  held  at  all  times,  we 
must  now  consider:  (1)  how  much  less  than  the  amount  provided  will  be  neces- 
sary for  death-losses;  (2)  how  much  more  will  be  received  in  net  premiums 
from  the  larger  number  of  living;  and  (3)  how  much  more  will  be  needed  as  a 
reserve  for  the  larger  number  of  living  at  the  end  of  five  years.  The  following 
table  shows  the  number  living  and  dying,  and  the  present  values  of  the  death- 
losses  in  each  year  at  the  table  rate  of  mortality : 

Age  Living  Dying  Losses  Present  Values 

35    81,822    732    $732,000    $710,679.77 

36  ..    81,090    737    737,000    694,693.25 

37    80,353    742    742,000    679,035.36 

38  79  611    749    749,000    665,476.76 

39    78,862    756    756,000    652,132.40 

40    78,106  

Total  present  values    $3,402,017.54 

The  following  table  shows  the  same  items  by  the  select  and  ultimate  method : 

Age  Living                 Dying                  Losses                   Present  Values 

35  81  822    366    $366,000    $355,339 .  88 

36 81,456    481    481,000   453,388 .  68 

37    80,975    561    561,000    513,394.66 

38    80,414    643    643,000    571,297.14 

39   79.771    726    726,000    626,254.13 

40    79,045                                                                     

Total  present  values    $2,519,674.49 

The  new  figures  of  living  and  dying  are  obtained  as  follows:  The  first 
year  we  have  the  number  of  living  as  in  the  table;  the  mortality  being  50% 
of  the  normal  the  number  dying  will  be  half  the  number  of  dying  by  the  table. 
The  new  number  of  living  at  age  36  is  81,822  less  366  =  81,456.  The  table  rate 
of  mortality  for  age  36  is  (the  number  of  dying  divided  by  the  number  of  living) 
the  decimal  .009089,  and  the  select  and  ultimate  rate  is  65%  of  this,  or  .00591, 
and  at  this  rate  the  number  of  deaths  among  81,456  will  be  481.  Deducting  this 
number  from  81,456,  we  get  the  next  number  of  the  living  and  proceed  as  before. 
The  amounts  are  discounted  for  one,  two,  three,  four  and  five  years  respectively 
by  using  the  decimals  from  the  table  of  values  of  one  dollar  due  in  one,  two, 
three,  etc.,  years. 

The  following  table  shows  the  excess  number  of  living  at  each  age  over  the 
numbers  of  the  Mortality  Table— who  will  pay  net  annual  premiums  of  $21.08 
on  the  Ordinary  Life  Policy : 

Age  Excess  No.  Amount  of  Prems.  Present  Values 

36 366   $7,715.28 $7,490.56 

37   .  ....   622   13,111.76 12,359.09 

38 803 16,927.24 15,490.83 

39   908   19,140.64   17,006.21 

40   939  

Total   present  values    $52,346. 69 


►Mr.  Dawson  was  Actuary  to  the  Armstrong  Committee. 


studies  in  Practical  Life  Insurance  53 

There  are  now  939  more  living  than  the  table  shows  and  the  reserve  for 
each  $1,000  insurance  at  the  end  of  the  fifth  year  is  $68.16;  hence  the  additional 
reserve  required  will  be  $64,002.24,  the  present  value  of  w^hich  is  $55,208.84. 
To  sum  up — we  have — 

Present    values    provided    in    net    premiums    at 

regular  mortality  rates  $3,402,017 .  54 

Additional  present  values  provided  in  net  pre- 
miums by  larger  number  of  living 52,346.69 

Total     $3,454,364 .  23 

Of  which  there  will  be  needed- 
Present   value   of   death-losses    by    select   and 

ultimate  method   $2,519,674.49 

Reserves    for    additional    number    living    five 
years    hence    55,208 .  84 

Total  $2,574,883.33 

Excess  of  present  values  provided  over  those  needed  for  death-losses  and 
reserves,  $879,480.90.  As  there  was  $81,822,000  insurance  taken  at  age  35  this 
gives  an  "assumed  mortality  gain"  of  $10.75  for  each  $1,000. 

The  assumed  mortality  gains  under  a  Twenty-Payment  Life  Policy  taken 
at  age  35  are  found  in  a  similar  manner  to  be  $10.52,  and  those  under  a  Twenty- 
Year  Endowment  Policy,  $10.21. 

The  reserve  at  the  end  of  each  of  the  first  four  years  by  the  select  and 
ultimate  method  may  be  obtained  in  the  same  manner  as  shown  in  the  table  on 
page  108.  We  begin,  as  in  the  table— with  81,822  persons  insured.  But  as 
$10.75  is  assumed  mortality  gains  and  is  set  aside  for  first  year's  expenses  out 
of  the  first  net  premium,  the  amount  received  for  death-losses  and  reserves  the 
first  year  is  $21.08  less  $10.75  =  $10.33.  We  then  proceed  as  in  the  first  table. 
The  amount  received  the  first  year  for  our  present  purpose  will  be 

81,822   X   $10.33    =    $845,221.26 

Add   one  year's   interest    25,366 .  63 

Total    $870,577 .  89 

Deduct   death-losses     366,000 .  00 

Balance    $504,577 .  89 

Dividing  this  by  the  number  living  (81,822  —  366)  81,456  gives  $6.19  the 
reserve  per  $1,000  by  the  select  and  ultimate  method  at  the  end  of  the  first 
year.  After  the  first  year  the  full  net  premium  is  used  Avith  the  number  living 
and  dying  as  shown  by  the  select  and  ultimate  method  above.  The  reserves 
per  $1,000  insured  for  the  Policies  under  consideration  by  the  American  Table 
and  by  the  select  and  ultimate  method  are  shown  as  follows : 

End  of  Ordinary  Life  20-Payt.  IJfe  20-Year  Endt. 

Year  A.  T.         S.  &  U.  A.  T.  S.  &  U.  A.  T.  S.  &  U. 

1 $12.88  ..  $6.19  ..  $22,.00  ..  $15.50  ..  $34.59   ..  $28.35 

2  26.13  ..  22.32  ..  44.72  ..     41.05  ..     70.40  ..     66.92 

3 39.76  ..  38.04  ..  68.20..     66.56  ..  107.50  ..  105.93 

4  53.77  ..  53.33  ..  92.46  ..     92.05  ..  145.91  ..  145.50 

5  68.16  ..  68.16  ..  117.52  ..  117.52  ..  185.71  ..  185.71 

At  the  end  of  the  fifth  year  the  full  reserve  is  held  on  each  policy,  and 
although  the  number  of  policies  is  now  greator  than  in  the  table  on  page  108 


54  Studies  in  Practical  Life  Insurance 

the  reserve  for  each  Policy  is  in  hand  and  the  net  annual  premiuuLS  will  be  here- 
after paid  by  each,  so  it  does  not  matter  whether  the  number  is  great  or  small— 
the  reserve,  together  with  the  net  preniiuins  and  interest,  will  pay  all  death- 
losses  as  they  occur. 

What  we  have  just  gone  over  has  its  bearing  on  the  question  of  dividends 
in  this  way — it  shows  that  if  the  full  amount  allowed  by  law  is  used  in  first  year's 
expenses  there  will  be  no  surplus  at  the  end  of  the  first  year  from  (a)  loading, 
nor  from  (b)  mortality  gains  actually  realized.  All  that  remains  of  premium 
and  interest  at  the  end  of  the  first  year  is  $6.19  per  $1,000,  the  small  reserve 
allowed  by  the  select  and  ultimate  method.  Moreover,  there  will  be  no  surplus 
from  mortality  gains  during  the  next  four  j-ears,  because  such  gains  have 
already  been  appropriated  to  bring  the  reserve  up  to  the  regular  table  rate  at 
the  end  of  the  fifth  year.  Still  further— we  have  not  charged  the  new  Policy  in 
its  first  year  with  its  proporlion  of  the  general  expense  of  the  company. 

As  the  law  allows  the  whole  present  value  of  assumed  mortality  gains  to 
be  used  for  first  year's  expenses,  and  makes  no  provision  for  general  expenses 
in  the  first  policy  year,  it  virtually  authorizes  a  company  to  pay  those  expenses 
out  of  surplus— in  other  words,  to  borrow  this  amount  from  the  other  policy- 
holders, assuming  that  it  will  be  made  up  in  the  years  following.  We  shall 
see  the  bearing  of  this  assumption  and  how  the  loan  may  be  adjusted  as  we 
proceed  with  our  study  of  the  policies  under  consideration. 

Ascertaining  the  Expense  Rate. 

In  order  that  we  may  follow  these  policies  through  several  years  we  will 
assume  that  they  were  written  in  1908,  and  will  now  ascertain  the  actual  expense 
rate  of  the  Company  during  that  year  under  three  heads  (a)  acquisition  expenses 
to  be  borne  by  new  business  only;  (b)  renewal  expenses  to  be  borne  by  old 
business  only;  (c)  general  expenses  to  be  borne  alike  by  new  and  old  business. 

We  give  here  a  resume  of  the  method  by  which  expenses  are  apportioned  to 
old  and  new  business  and  print  in  the  appendix  the  full  text  as  made  up  by  the 
Actuaries'  Department  of  the  Company.  From  the  total  disbursements  shown  in 
the  annual  report  to  the  Insurance  Department  are  deducted  the  sums  paid 
policy-holders  under  all  forms  of  contract.  To  the  balance  thus  obtained  are 
added  commissions  paid  on  reinsurance  premiums,  such  commissions  and  reinsur- 
ance premiums  not  being  included  in  income  and  disbursements  for  reasons  ex- 
plained on  page  62.  From  this  total  are  deducted  (a)  certain  bookkeeping  items 
wliich  appear  in  both  the  income  and  disbursement  accounts  (and  so  balance  each 
other)  ;  (b)  certain  items  which  are  deducted  from  the  interest  account  in  making 
up  the  net  effective  rate  of  interest  '(including  investment  expenses) ;  and  (c) 
expenses  on  annuities  and  on  single  premiums.  The  balance  shows  the  amount  of 
insurance  expenses  to  be  assessed  upon  annual  premiums  for  insurance.  The 
remaining  items  are  divided  into  three  parts  according  as  they  represent  (1) 
direct  acquisition  expenses,  (2)  renewal  expenses,  and  (3)  general  expenses.  The 
following  results  are  shown: 

I.     Direct   acquisition   expenses $2,722,672 

II.     Renewal   expenses    1,076,472 

III.     General  expenses    5,180.742 


Studies  in  Practical  Life  Insurance  55 

We  have  already  seen  in  our  examination  of  the  loading  on  Limited-Payment 
Life  Policies  and  Endowment  Policies  that  it  consists  approximately  of  the  Ordi- 
nary Life  loading  plus  one-half  this  rate  on  the  excess  of  the  premium  over  the 
Ordinary  Life  premium.  This  excess  is  called  the  higher  premium  element.  In 
order  to  bring  all  premiums  to  a  common  basis  for  the  assessment  of  expenses 
an  adjustment  is  made  of  other  than  Ordinary  Life  premiums  as  follows:  To 
an  amount  equal  to  the  Ordinary  Life  element  is  added  one-half  the  balance  or 
higher  premium  element.  The  same  result  is  reached  by  adding  together  the  total 
premiums  and  the  Ordinary  Life  element  in  all  and  taking  half  the  sum.  To 
illustrate:  the  premiums  on  the  three  Policies  under  consideration  are- 
Ordinary  Life  $28 .  11 

Twenty-Payment   Life    38.34 

Twenty-Year    Endowment    51.91 

Total    $11S .  36 

Ordinary  Life  element  28.11  x  3   84.33 

One-half  higher  premium  element  (118.36  —  84.33)..       17.01 

Total  adjusted  premiums  on  the  3  policies $101.34 

The  sum  of  the  three  adjusted  premiums  is  84.33  -f-  17.01. 
^,  .       ,        118.36  +  84.33 
It  is  also  ^ 

To  the  Company's  ordinary  renewal  premiums  are  added  the  reinsurance 

premiimis,  and  the  above  adjustment  is  made  with  the  following  result: 

L     Adjusted  new  premiums  $4,808,000 

II.     Adjusted   renewal   premiums    61,505,000 

III.     Total  adjusted  premiums  66,313,000 

Dividing  the  corresponding  amounts  of  expenses  by  the  amounts  here  shown 

gives  the  following  ratios  of  expense : 

I.     Ratio  of  acquisition  expenses  56.63% 

II.     Ratio  of  renewal   expenses 1.75% 

III.     Ratio  of  general  expenses 7.81% 

Considering  the  expense  rate  from  its  legal  side  we  have  the  following  :* 

Total  first  year's  expense  margins $3,189,480 

Total  acquisition  expenses    2,794,223 

Ratio  of  acquisition  expenses  to  expense  margins..  87.61% 

Total  expense  margins  on  all  business $18,143,194 

Total   expenses    9,867,161 

Ratio  of  total  expenses  to  total  expense  margins.  .  .  .  54.38% 

Ascertaining  the  Interest  Rate. 

We  will  now  consider  the  interest  rate,  following  the  same  method  as  in  the 
case  of  expenses.  It  should  be  noted  at  the  outset  that  we  are  not  seeking  to 
obtain  the  real  rate  of  interest  earned  upon  the  Company's  investments,  but  the 
Net  Effective  Bate  received,  for  the  purpose  of  the  dividend,  upon  the  Policies 
under  consideration.  If  we  were  doing  the  former  we  should  take  the  ledger 
assets  of  the  Company  as  the  basis  of  our  divisor ;  but  for  our  present  purpose 
we  take  a  divisor  based  upon  these  liabilities  of  the  Company  which  from  their 
nature  need  to  earn  interest.  With  this  thought  in  mind  the  division  of  the 
liabilities  of  the  Company  into  (a)  liabilities  not  required  to  bear  interest,  and 
(b)  liabilities  normally  drawing  interest,  will  be  understood.! 


•.see  N.  Y.  Ins.  Report,  business  of  1908,  page  216. 
fSee  Appendix,   page  109. 


56  Studies  in  Practical  Life  Insurance 

The  amoKid  of  net  effective  interest  includes  all  credit  items  of  profit  and 
loss,  and  excludes  all  debits  of  a  similar  character,  real  estate  expenses  and 
taxes,  income  tax  on  interest  receipts  and  the  cost  of  caring  for  investments. 
The  law  allows  for  the  latter  one-fourth  of  one  per  cent,  upon  the  mean 
invested  assets.  In  the  first  year  (1907)  after  the  law  went  into  effect  the 
Company  made  the  full  deduction  in  determining  expense  ratios  and  net  effective 
interest  rate.  In  1908  it  took  three-sixteenths  instead,  and  in  1909  it  reduced  it  to 
one-eighth.  After  making  the  proper  adjustments  the  Net  Effective  Rate  of 
interest  is  found  to  be  4.225%. 

This  was  the  net  effective  rate  derived  from  the  entire  funds  of  the  Com- 
pany ;  but  there  were  certain  adjustments  to  be  made  by  reason  of  a  requirement 
of  the  French  Government— that  certain  investments  for  the  protection  of  French 
policy-holders  should  be  made  in  French  bonds.  As  these  bonds  bear  a  rate  of 
interest  lower  than  that  obtained  from  the  Company's  other  securities,  three  net 
effective  rates  of  interest  were  obtained:  (1)  the  rate  shown  above— obtained 
from  all  the  Company's  securities;  (2)  the  rate  obtained  by  omitting  the  French 
bonds  from  the  calculation ;  (3)  the  rate  obtained  from  all  securities  deposited 
with  the  French  Government — assuming  all  except  the  bonds  in  question  to 
earn  the  rate  (2).  The  rate  applicable  to  the  Policies  under  consideration  is 
rate  (2),  4.238%. 

No  DiMDEND  Earned  in  First  Year. 

We  are  now  ready  to  consider  how  our  three  Policies  issued  in  1908,  stand 
at  the  end  of  the  first  year  with  respect  to  a  dividend  under  the  most  favorable 
assumptions  possible.  We  give  below  the  showing  of  each  Policy  assuming 
(1)  an  acquisition  exjpense  rate  equal  to  87.61%  of  the  expense  rate  alloAved  by 
the  law;  (2)  a  general  expense  rate  of  7.81%— the  actual  rate  of  the  Company; 
(3)  the  select  and  ultimate  rate  of  mortality,  and  (4)  the  select  and  ultimate 
reserve  at  the  end  of  the  year. 

ORDINARY   LIFE    POLICY. 

Premium    received    $28 .  11 

♦Acquisition  expenses    $15 .  58 

General  expenses  7.81%  of  premium 2.20 

Total  expenses    17.78 

Balance     $10.33 

Add  interest  at  4 .  238% .44 

Total  $10.77 

tDeduct  net  cost  of  insurance 4.45 

Balance     $6.32 

Select  and  ultimate  reserve  6.19 

Surplus     $0.13 

♦  The  legal  expense  margins  are:  loading  $7.03,  assumed  mortality  gains  $10.75;  total 
$17.78.  of  wlilrh  87.61   per  cent.   Is  $15.58. 

t  The  net  amount  at  risk  Is  $1,000  less  the  reserve  on  hand  at  the  end  of  the  year.  The 
cost  is  found  by  multiplying  the  net  insurance  $994  by  the  risk  of  death  .004473— which  Is  50  per 
cent,  of  the  table  rate. 


Studies  in  Practical  Life  Insurance  57 

TWENTY-PAYMENT    LIFE    POLICY. 

Premium    received    $38.34 

*Acquisition  expenses  .$10 .  05 

tGeneral  expenses  7 .  81% 2.59 

Total  expenses - 19 .  24 

Balance    $19 .  10 

Add  interest  at  4.238% 81 

Total     $19.91 

tDeduct  net  cost  of  insurance 4.40 

Balance    $15 .  51 

Select  and  ultimate  reserve 15.50 

Surplus     $0.01 

*The  legal  expense  margins  are:  loading  ?8.4<i,  assumed  mortality  gains  $10.52,  total  19.01, 
of  which  87.61%,  is  $16.65. 

fCalculated  on  the  adjusted  premium  28.11   +  38.34   =   33.22. 

JThe  net  insurance— $1,000  —  15.50   =   $984.50. 


TWENTY-YEAR    ENDOWMENT   POLICY. 

Premium  received    $51 .  91 

♦Acquisition  expenses    $17.65 

tGeneral   expenses    7.81'/ 3 .  12 

Total  expenses   20.77 

Balance    $31.14 

Add  interest  at  4.238% 1.32 

Total    $32.46 

Deduct  net  cost  of  insurance 4 .  35 

Balance    $28.11 

Select  and  ultimate  reserve 28.35 

Deficit    $0.24 

*  The  legal  expense  margins  are:  loading  $9.94,  assumed  mortality  gains  $10.21,  total 
$20.15,  of  which  87.61  per  cent,  is  $17.65. 

t  Calculated  on   the  adjusted   premium  28.11  4-  51.91  —  40.01 

2 

Under  these  favorable  assumptions  the  three  policies  show  as  a  whole  a 
slight  deficit.  Nevertheless  the  Company  does  not  stand  to  lose  anything — 
because  it  still  has  on  hand  a  small  balance  from  each  and  if  the  second  pre- 
mium is  not  paid  no  reserve  will  be  needed.  It  is  obvious  that  no  dividend  can 
properly  be  declared  on  them,  because  if  declared  it  must  be  paid  whether  the 
second  premium  is  paid  or  not.  ^ 

This  Result  Foreseen. 

The  Officers  of  the  Company  foresaw  that  'this  would  be  the  case  when  it 
resumed  the  issue  of  annual  dividend  policies,  in  1906,  in  anticipation  of  the 


58  Studies  in  Practical  Life  Insurance 

law  taking  effect  in  1907,  and  it  sent  out  with  each  Policy  a  notice  to  that 
effect,  in  order  to  prevent  disappointment  on  the  part  of  policy-holders.  The 
Company  also  took  early  steps  to  devise  a  proper  method  of  accounting  with 
annual  dividend  policies  during  the  first  five  years  of  their  existence.  During 
these  years  these  Policies  confessedly  stand  in  a  different  relation  to  the  Com- 
pany— that  is  to  say,  the  whole  body  of  policy-holders — from  that  which  they 
afterward  occupy — first  in  reference  to  acquisition  expenses,  second  in  refer- 
ence to  mortality,  and  third  in  reference  to  profits  from  discontinued  policies. 
The  law  assumes  that  the  first  difference  will  be  offset  by  the  second;  but  it 
takes  no  account  of  general  expenses  in  the  first  year,  nor  of  the  profits  from 
lapses— which  are  chiefly  in  the  first  five  years,  both  because  of  the  larger  pro- 
portion of  lapses  during  those  years  and  because  of  the  larger  surrender  charge 
in  proportion  to  the  reserve.  It  virtually  assumes  that  one  of  these  will  offset 
the  otiier. 

The  New-York  Life  did  not  wish  to  avail  itself  of  the  permission  of  the 
law  to  hold  a  reserve  smaller  than  the  full  table  rate,  nor  did  it  wish  to  assume 
a  mortality  in  accordance  with  the  select  and  ultimate  method.  It  preferred 
to  set  aside  the  full  reserve— which  the  law  allows  it  to  do — and  to  be  guided 
by  its  own  mortality  and  lapse  experience.  It  has  been  in  business  over  sixty- 
five  years  and  has  constructed  from  its  own  experience  a  mortality  table  repre- 
senting a  large  part  of  that  experience  in  each  year  of  insurance  from  the  first 
to  the  twentieth.  This  might  be  called  the  New-York  Life's  Select  and  Ultimate 
Table— it  is  called  the  "Compound  Progressive  Mortality  Table".  Assuming 
these  rates  and  its  own  experience  as  to  lapses  it  worked  out  the  problem  in 
advance  and  found: 

1.  That  loadings  on  first  year's  premiums  plus  mortality  savings  and 
profits  from  lapses  during  the  first  five  years  might  safely  be  relied  on  to  pay 
both  acquisition  expenses  and  general  expenses  of  the  first  year  and  to  make 
good  the  difference  between  the  select  and  ultimate  reserve  and  the  full  reserve  ; 

2.  That  the  Company  might  therefore  safely  set  aside  the  full  reserve  at 
the  end  of  each  year ; 

3.  That  dividends  might  be  apportioned  after  the  first  year  from  (a)  sur- 
plus from  the  loading,  and  (b)  surplus  from  excess  interest  over  three  per  cent. 
on  the  reserve. 

This  method  has  several  important  advantages  over  a  year  by  year  esti- 
mate of  all  the  factors  in  the  case :  (1)  It  bridges  over  the  hiatus  left  by  the 
law  with  respect  to  general  expenses  of  the  first  year  of  insurance;  (2)  it  leaves 
the  Company  free  to  base  the  dividend  upon  factors  which  are  fairly  constant, 
and  wliich  result  normally  in  an  increasing  dividend  each  year;  and  (3)  by 
placing  the  full  reserve  to  the  credit  of  the  Policy  each  year  the  cash  surrender, 
loan  and  insurance  values  may  be  made  lai-ger  in  the  early  years  of  the  policies 
than  they  could  be  if  only  the  select  and  ultimate  reserve  were  used.* 


•The  annual  dividend  policies  issued  by  the  Company  in  1906  are  now  in  tlieir  fifth  year 
and  are  showing  the   results  assumed. 


studies  in  Practical  Life  Insurance  51) 

Ascertaining  the  Dividend  Earned  in  Second  Year. 

Let  us  now  consider  what  divick-nds  may  be  paid  on  the  Policies  in  question 
at  the  end  of  their  second  year.  The  Net  Effective  Rate  of  Interest  for  this 
purpose  in  1909  was  4.35%,  and  Expense  Ratios  were  as  follows: 

I.     Ratio  of  first  year's  expenses 56.137o 

II.     Ratio  of  Renewal  expenses 1 .  79% 

III.     Ratio  of  general  expenses 8.17% 

The  general  expense  ratio  and  the  renewal  expense  ratio  chargeable  on  these 
Policies  give  a  ratio  of  9.96%. 

Applying'  this  ratio  to  the  Policies  under  consideration  we  get  the  following 
results : 

ORDINARY     LIFE     POLICY. 

1st  item  of  surplus — from  loading: 

Loading  from  second  premium $7 .  03 

Expenses— 9.96%    of  $28.11 2.80 

Balance $4 .  23 

Add  interest  at  4.35'  / -18 

Total $4.41 

2d  item  of  surplus^ — from  excess  interest: 

Reserve-end  of  first  year $12.88 

Net   premium  received 21.08 

Reserve  end  of  second  year 26.13 

$60.09* 

Mean  amount  at  interest $30 .  04 

Interest  at  1.35%    v4.35— 3.00) 41 

1.  Surplus  from  loading $4 .  41 

2.  Surplus  from  excess  interest .41 

$4.82 
Dividend    97%    $4.67 

TWENTY-PAYMENT    LIFE    POLICY. 

1st   item — surplus  from  loading: 

Loading  from   second   premium $S .  49 

Expenses— 9.96';    of  28.11  +  38.34 3.31 

2  

Balance     $5.18 

Add  interest  at  4 .  35% 22 

Total      $5. 40 

2d  item — surplus  from  excess  interest: 

Reserve  end  of  first  year $22 .  00 

Net   premium    received 29 .  85 

Reserve  end  of  second  year 44 .  72 

$96.57* 

Mean  amount  at  interest $48.28 

Interest    at   1 .  Z5% 0.65 

1.  Surplus  from  loading $5.40 

2.  Surplus   from  excess   interest .65 

Total  surplus    $6 .  05 

Dividend  97%    5.86 

*See  note  next  page. 


60  Studies  in  Practical  Life  Insurance 

TWENTY-YEAR    ENDOWMENT    POLICY. 

1st  item — surplus  from  loading: 

Loading  from  second  premium $9.94 

Expenses  9.96%  of  28.11  +  51.91   3 .  98 

2  

Balance    $5 .  96 

Add  interest  at  4.35% .25 

$6.21 
2d  item — surplus  from  excess  interest: 

Reserve  end  of  first  year $34 .  59 

Net  premium  received   41.97 

Reserve  end  of  second  year 70.40 

$146.96* 

Mean  amount  at  interest $73.48 

Interest  at  1.35% 0.99 

1.  Surplus  from  loading $6.21 

2.  Surplus  from  excess  interest .99 

Total  surplus   $7.20 

Dividend   97%    6.98 

Of  course  it  was  the  duty  of  the  Trustees  to  consider  what  part — if  any — 
of  the  surplus  arising  from  these  policies  should  be  appropriated  to  contingency 
reserve  and  what  part  to  a  dividend.  Life  insurance  is  a  system  based  upon 
averages — averages  of  lives,  averages  of  years  and  averages  of  experience  in 
investing  money,  and  the  object  is  to  produce  from  these  averages  certain 
uniform  results.  The  dividend  declared  by  the  Company  upon  these  policies 
was  97%  of  the  total  surplus  arising  in  1909  from  the  two  sources  named,  and 
100%  of  such  sui^plus  in  1910.  The  dividends  as  found  above  are  those  earned 
in  1909  and  paid  in  1910.  Those  paid  in  1911  on  the  three  policies  in  question 
were  $4.82,  .$6.14  and  $7.40  respectively.  They  may  be  verified  by  using  the 
expense  ratio  and  net  effective  rate  of  interest  for  1910,  which  are  as  follows: 

Total  expense  ratio  applicable  to  old  business  1910 10.34% 

Net  effective  interest  rate  for  policies  of  this  class.  . . .     4.23% 

We  have  now  examined  three  representative  policies  clause  by  clause,  to 
ascertain  just  what  they  guarantee  to  the  holder;  we  have  gone  over  the  mathe- 
matical calculations  upon  which  the  different  benefits  are  based;  we  have  seen 
how  surplus  earnings  are  apportioned;  we  have  left  the  policies  in  force  on  the 
books  of  the  Company.  It  is  now  time  to  examine  the  business  of  the  Company 
as  a  whole,  and  this  we  propose  to  do  in  the  following  chapter. 


*Tlie  sum  of  the  reserve  at  the  end  of  the  first  year  and  of  tlie  net  premium  received 
at  the  beginning  of  the  second  year  constitute  the  reserve  at  the  beginning  of  the  second  year. 
The  mean  amount  at  interest  is  therefore  one-half  the  sum  of  these  amounts  and  of  the  reserve 
at   tlie   end    of   tlie   second    year. 


CHAPTER  III. 

llEroiriS   AND    EXAMINATIONS. 

The  reader  cannot  do  better  at  this  point  than  to  turn,  to  the  Appendix 
and  read  sections  44,  45  and  103  of  the  Insurance  Law.  These  sections  (1) 
impose  the  obligation  to  make  annual  reports,  (2)  give  the  Superintendent 
authority  to  prescribe  forms,  and  (3)  declare  that  such  reports  shall  contain 
certain  information  specified.  This  does  not  prevent  the  Superintendent  from 
requiring  much  more— it  makes  it  certain  that  certain  information  will  not  be 
omitted.  We  will  take  up  first  the  report  required  by  the  State  of  New  York 
and  then  indicate  briefly  the  additional  information  required  by  the  authorities 
of  other  States  and  countries. 

Outline  of  Annual  Report. 

The  report  of  the  New-York  Life  to  the  New  York  Insurance  Department 
for  the  year  1910  is  a  printed  folio  volume  of  168  pages  and  consists  of — 

1.  Income  and  Disbursements ;  Assets  and  Liabilities  in  the  form  of  a  balance 
sheet— beginning  with  the  ledger  assets  of  the  previous  year,  and  ending  with 
the  gross  assets  as  admitted  by  the  Insurance  Department ; 

2.  An  Exhibit  of  Policies,  showing  the  number  and  amounts  in  force  at  the 
beginning  and  end  of  the  year  and  the  changes  during  the  year.  This  is  made 
for  the  State  of  New  York  on  the  basis  of  paid-for  business  only ;  for  other  States 
—as  their  laws  require— either  on  a  paid-for  basis  or  an  issued  basis; 

3.  Business  in  the  State  of  New  York  in  brief— the  copies  going  to  other 
States  containing  an  exhibit  of  the  business  in  those  States ; 

4.  Gain  and  Loss  Exhibit  showing  actual  expenses,  interest  and  mortality  in 
connection  with  legal  allowances  and  office  assumptions  respectively;  the  profits 
from  lapses  and  surrenders,  gain  and  loss  on  investments,  etc. ; 

5.  Premium  Note  account; 

6.  Schedule  of  cash  and  deposits  of  the  Home  Office  with  banks  and  trust 
companies  in  the  United  States  and  Canada  ;  and  cash  with  foreign  banks,  govern- 
ments and  Branch  Offices ; 

7.  Special  and  General  Deposit  Schedules,  showing  in  detail  the  securities 
deposited  with  the  authorities  of  different  States  and  countries  in  pursuance  of 
legal  requirements; 

8.  Real  Estate  Schedule,  showing  each  parcel  of  property  owned  by  the 
Company,  with  particulars  of  cost,  income,  taxes  and  improvements;  also  de- 
tails of  all  purchases  and  sales  made  during  the  year; 

9.  Mortgage  Schedule,  with  description,  location,  etc.,  of  each  piece  of 
property  mortgaged  to  the  Company;  also  an  account  of  mortgage  loans  made, 
increased,  reduced,  discharged  or  disposed  of  during  the  year;  also  showing  the 
amount  loaned  in  each  State  and  foreign  country. 


62  Studies  in  Practical  Life  Insurance 

10.  Collateral  Loan  Exhibit,  with  similar  information ; 

11.  Bond  Schedule,  showing  in  detail  the  bonds  owned  with  book,  par  and 
market  values;  date  of  purchase  and  from  whom  acquired,  interest  received, 
etc. ;  also  separate  schedules  of  all  bonds  acquired  or  disposed  of  during  the 
year,  with  the  profit  or  loss  on  each  lot  sold ; 

12.  Schedule  of  Bank  Balances,  showing  the  largest  balance  carried  in 
each  bank  and  trust  company  in  each  month  of  the  year ; 

13.  Schedule  of  Contested  Policies,  showing  name  and  residence  of  in- 
sured, amount  of  Policy,  reason  for  contesting;  also  all  settlements  of  contested 
cases  made  during  the  year; 

14.  Schedule  of  Salaries,  Compensation  and  Emoluments  of  all  persons  or 
corporations,  to  whom  $5,000  or  over  was  paid  during  the  year; 

15.  Schedule  showing  all  salaries  paid  for  agency  supervision ; 

16.  Schedule  showing  all  commissions  paid  on  loans  or  on  purchase  or 
sale  of  property  during  the  year; 

17.  Schedule  of  Legal  Expenses,  showing  amounts,  to  whom  paid,  and  for 
what  service  rendered; 

18.  Schedule  of  Expenditures,  in  connection  with  matters  before  legisla- 
tive bodies,  officers  or  departments  of  government; 

19.  Dividend  Schedule,  showing  dividends  paid  under  all  forms  of  policies 
in  various  years  and  for  various  ages;  including  explanations  of  the  methods 
by  which  dividends  w^ere  calculated  on  all  classes  of  policies ; 

20.  Schedule  showing  in  detail  all  money  expended  in  connection  with  the 
election  of  directors. 

21.  In  addition  to  this  printed  form  Policy  Valuation  Schedules  are  fur- 
nished, showing  in  groups  by  kind  of  Policy,  amount  of  insurance,  age  of  in- 
sured, and  years  in  force,  the  data  necessary  for  making  a  complete  valuation 
of  its  Policy  liabilities. 

Income  and  Disbursements. 

Having  given  this  general  outline  of  the  Annual  Report,  let  us  dig  into 
the  Income  and  Disbursement  accounts  a  little.  There  are  some  items  that  wull 
need  explanation,  and  here  is  a  good  place  to  show"  w^hy  some  items  are  treated 
as  they  are  in  the  calculation  of  Net  Effective  Rate  of  Interest  and  the  Expense 
Ratios— already  used  in  the  calculation  of  dividends.  For  this  reason  we  will 
use  the  Report  for  1908  and  account  for  the  treatment  of  certain  items  therein. 

The  first  item  in  the  income  account  that  is  dealt  wnth  in  a  peculiar  way, 
is  reinsurance.  When  a  company  writes  a  policy  for  a  larger  amount  than  it 
wishes  to  carry  on  a  single  life,  it  reinsures  a  part  of  the  risk  in  another  com- 
pany. But  in  order  that  the  same  transaction  may  not  be  counted  twice  in 
summations  including  the  business  of  the  various  companies,  the  premiums 
received  on  the  amount  reinsured,  the  commissions  paid,  and  the  death-losses 
paid  on  same  are  included  in  the  report  of  the  reinsuring  company  only.  The 
original  company'  reports  its  premiums  received  less  reinsurance  premiums,  its 


Studies  in  Practical  Life  Insurance  63 

coramissions  paid  less  reinsurance  commissions,  and  its  death-losses  less  the 
amount  received  from  other  companies  on  risks  reinsured.  Dividends,  how- 
ever, are  paid  by  the  original  compan}-  upon  tlie  whole  amount,  hence  in  cal- 
culating the  expense  ratio  the  premiums  received  and  the  commissions  paid  are 
included  in  the  calculation.  If  the  risk  is  reinsured  at  a  participating  rate, 
dividends  are  paid  by  the  reinsuring  company  to  the  original  company. 

The  item  "consideration  for  supplementary  contracts  involving  life  con- 
tingencies" refers  to  death-losses  the  value  of  which  the  beneficiaries  are  to 
receive  in  a  fixed  number  of  annual  instalments  and  a^miiity  or  in  annuity  alone. 
When  such  a  Policy  matures  the  Company  credits  itself  with  having  paid  it  as 
a  death-loss  and  charges  itself  with  the  same  amount  as  consideration  for  the 
supplementary^  contract.  If  the  amount  is  to  be  paid  in  instalments  without 
annuity,  it  is  treated  in  the  same  way,  except  that  it  appears  as  income  under  the 
item,  "Consideration  for  supplementary  contracts  not  involving  life  contingen- 
cies." 

The  other  entries  in  premium  income  are  easily  understood  and  no  further 
reference  would  be  made  to  them  were  it  not  that  one  of  them  is  sometimes  dif- 
ferently treated.  In  the  New- York  Life's  report  dividends  are  reported  according 
to  the  cash  dividend  system — not  according  to  the  reversionary  dividend  system. 
The  Trustees  declare  a  dividend  because  the  Company  has  so  much  cash  to  divide 
—  not  because  it  has  so  much  paid-up  insurance  to  divide.  The  entries  are  made 
in  the  report  according  to  the  way  the  dividend  is  finally  applied  and  in  no  other 
way.  The  reversionary  dividend  system  increases  the  figures  of  premiums  re- 
ceived, insurance  (paid-up  additions)  written,  insurance  surrendered  and  cash 
paid  for  insurance  surrendered,  without  putting  a  penny  more  into  the  com- 
pany's till,  or  into  the  policy-holder's  pocket.  It  is  a  relic  of  the  time  when 
dividends  were  made  in  paid-up  additions  to  the  Policy— and  in  no  other  way.* 

Items  Treated  in  an  Exceptional  AVay. 

There  are  some  items  in  income  that  are  neither  premiums  nor  interest;  and 
there  are  some  disbursements  that  are  neither  payments  to  policy-holders  nor 
expenses  of  management;  these  are  the  items  which  we  propose  to  explain  and 
to  show  how  they  are  treated.  While  they  are  strictlj'  matters  of  bookkeeping, 
they  are  none  the  less  matters  which  pertain  to  practical  life  insurance.  The 
bookkeeping  methods  adopted  are  intended  both  to  show  a  true  balance— account- 
ing for  all  moneys  received  and  expended— and  also  so  to  segregate  certain  items 
as  to  show  their  true  character.  Some  appear  on  both  sides  of  the  account  and 
so  balance  each  other.  As  most  of  these  items  are  dealt  with  in  the  interest  and 
expense  calculations,  we  will  take  up  in  this  connection  these  papers  as  printed 
in  the  appendix.  See  page  109 ;  also  Avhat  is  said  of  the  purpose  of  the  calculation 
on  page  56. 

The  comments  referred  to  above  will  explain  the  purpose  and  the  method  used 
in  ascertaining  the  proper  divisor  in  the  paper  on  Net  Effective  Interest  Rate.  Let 
us  note  why  certain  items  are  deducted  from,  and  why  others  are  included  in 


*  See  S.  C.  H.,  page  313;  also  New  York  Ins.   Report  for  1908,  page  167,   note,  and  Mass. 
Ins.   Report,   page   125,   note. 


64  Studies  in  Practical  Life  Insurance 

interest.  Account  is  first  taken  of  tlie  state  of  the  interest  account  at  the  begin- 
ning and  close  of  the  year  and  the  increase  in  net  interest  and  rents  due  and 
accrued  is  included.  The  amount  due  and  accrued  a  year  ago  belongs  in  the 
previous  year's  interest  earned  but  was  received  this  year;  while  the  amount  now 
due  and  accrued  was  earned  this  year;  hence  the  increase  is  added  to  actual 
receipts.  The  amount  of  accrued  interest  is  large — the  explanation  is  it  includes 
all  the  coupons  due  January  first,  while  the  report  covers  the  year  ending  De- 
cember thirtj'-first  preceding. 

In  order  to  get  the  net  income  from  real  estate,  taxes  and  repairs  must  be 
deducted ;  as  securities  are  disposed  of  by  reason  of  maturity  or  otherwise  items 
( f  profit  and  loss  appear  on  both  sides  of  the  account.  The  interest  account  is 
entitled  to  all  gains  and  must  bear  all  losses— they  are  necessary  incidents  in  the 
investment  of  money.  The  same  is  true  of  exchange  and  of  bank  charges — some- 
times exchange  is  in  the  Company's  favor  and  the  interest  account  is  credited 
with  the  gain ;  sometimes  it  is  against  the  Company  and  the  interest  account  is 
charged  with  the  loss.  Sometimes — usually— the  Company  receives  interest  on 
bank  balances— but  under  certain  circumstances  banking  privileges  cost  some- 
thing and  the  cost  is  charged  to  interest  account.  A  doubtful  debt  is  marked  off 
and  charged  to  profit  and  loss;  if  later  it  is  recovered  it  is  credited  to  the  same 
account. 

The  assets  at  the  end  of  the  year  include  the  interest  received  during  the 
year.  As  interest  is  not  reckoned  on  interest  in  the  year  it  is  received — the 
amount  of  the  interest  is  deducted— one-half  in  taking  the  mean  of  the  assets  at 
the  beginning  and  end  of  the  year,  the  other  half  by  subtraction  from  the  mean 
amount.  If  a  man  has  $100  at  the  beginning  of  the  year  and  receives  $10  per 
month  during  the  year  and  interest  at  4%,  his  interest  rate  would  prove  up  as 
follows:  Assets  at  beginning  of  year  $100;  interest  on  same  for  year  $4.00; 
interest  on  half  of  $120— $2.40;  assets  at  end  of  year  $226.40;  mean  amount 
$163.20.  The  interest  is  $6.40  and  the  rate  4%,  the  divisor  must  therefore  be 
$160,  that  is  the  mean  amount  $163.20  less  half  the  interest. 

With  the  explanations  already  made  the  student  will  have  no  difficulty  in 
understanding  the  treatment  of  various  items  in  the  paper  on  Assessment  of 
Expenses. 

Expenses  Imposed  by  Law. 

Resuming  our  examination  of  the  income  and  disbursement  accounts  we  note 
(in  disbursements)  the  deduction  from  the  amount  of  death-losses  paid  the 
amount  reinsured— for  reasons  already  explained.  The  account  is  carefully  item- 
ized after  the  form  furnished  by  the  Superintendent  of  Insurance,  and  this  form 
determines  under  what  head  disbursements  must  be  entered.  Those  that  are  in  the 
nature  of  profit  and  loss  we  have  already  met  with  and  disposed  of.  Only  three 
others  call  for  comment  here— the  amount  paid  the  Insurance  Department  for 
an  examination  of  the  Company  ($18,925.03),  the  amount  paid  as  taxes  of  vari- 
ous kinds  imposed  by  State,  county  and  city  laws  ($943,460.22),  and  the  amount 
paid  for  Trustee  Electicm  expenses  ($34,736.02).  These  expenses  were  all  im- 
posed by  law. 


studies  in  Practical  Life  Insurance  65 

As  will  be  seen  by  refei-enee  \o  Section  89  of  the  Insurance  Law,  printed  in 
the  Appendix,  the  Superintendent  nmst  examine  every  company  at  least  once 
every  three  years.  The  Xew-York  Life  was  examined  in  1908.  and  an  examina- 
tion is  going  on  at  the  present  time  uMay,  IDII  k  These  examinations  are  con- 
ducted by  experts  and  cover  every  department  of  the  Company's  business,  in- 
cluding both  its  transactions  and  its  methods.  The  Company  is  also  subject  to 
examination  by  the  insurance  officials  of  other  States  and  countries.  The  last 
iwaniination  of  this  kind  was  made  in  1906,  and  was  participated  in  by  representa- 
tives of  the  insurance  depai-tineuts  of  Tennessee,  Kentucky,  Wisconsin.  Nebraska 
<iud  Minnesota. 

We  give  in  the  Appendix,  page  112,  a  detailed  statement  of  the  taxes  paid  in 
each  State  in  the  Union.  It  will  be  noted  that  they  are  of  several  kinds,— and 
that  the  tax  rate  on  premiums  in  different  States  is  very  unequal,  being  more  than 
twice  as  great  in  some  States  as  in  others.  The  total  amount  paid  in  taxes  by 
tlie  Company  was  equal  to  one  and  two-tenths  per  cent,  on  its  total  premium 
receipts.  It  was  over  two-thirds  as  much  as  the  total  salaries  and  all  other  com- 
pensation of  officers,  directors  and  Home  Office  employees— orer  one  thousand  in 
number!  These  taxes  are  in  addition  to  all  taxes  on  real  estate.  Since  1908  the 
corporation  tax  of  the  Federal  Government  has  been  added  to  the  tax  burdens 
of  life  insurance  companies. 

The  cost  of  election  of  Trustees  is  divided  according  to  law  to  show  the  cost 
for  each  election.  There  was  no  contest  in  either  of  the  years  for  which  these 
expenses  were  incurred,  but  the  expenses  were  incurred  in  preparing  for  a  pos- 
sible contest.  The  Company  must  always  be  ready  to  furnish  the  Superintendent 
of  Insurance  with  complete  lists  of  all  policy-holders  with  their  postoffice  ad- 
dresses, and  to  furnish  such  other  lists  of  policy-holders  in  separate  jurisdictions 
as  the  Superintendent  may  approve.  ( See  Section  94,  Insurance  Law  in  Appen- 
dix.) This  necessitates  maintaining  a  "Stencil  Division"  of  over  forty  pei-sons, 
with  special  typewriters,  stencil  printing  machines,  etc.  The  new  names  added, 
the  changes  and  corrections  require  the  writing  of  about  1,500  stencils  each  day, 
and  the  Division  is  capable  of  supplying  a  complete  list  of  policy-holders  in  72 
working  hours. 

Assets— Valuation  op  Bonds,  etc. 

The  "Ledger  Assets"  correspond  in  a  way  to  the  money  received  by  the 
Government  and  "covered  into  the  Treasury"— it  cannot  be  got  out  without  an 
appropriation.  It  must  be  accounted  for.  But  the  question  arises  respecting 
every  interest-bearing  security— what  is  it  worth?  If  a  piece  of  real  estate  is 
bought— it  may  increase  in  value  or  it  may  depreciate.  Its  value  to  the  Company 
usually  lies  in  the  income  it  produces,  and  it  is  usually  valued  upon  an  income- 
producing  basis  showing  at  least  4%  net.  If  the  valuation  needs  to  be  reduced 
in  order  to  bring  it  to  this  basis  the  reduction  is  charged  to  profit  and  loss  and 
comes  out  of  the  net  effective  interest.  In  a  similar  way  the  interest  account 
gets  the  benefit  of  an  increase  in  value.  The  latter  is  not  usually  done,  however, 
until  the  property  is  sold. 

In  the  case  of  bonds  a  somewhat  different  course  is  pursued.  A  bond 
is    an    agreement    to    pay    a    certain    sum    at    the    end    of    a    certain  period 


66  Studies  in  Practical  Life  Insurance 

with  interest  semi-annually  or  quarterly  at  a  certain  per  cent.  But  the 
price  of  bonds,  having  say  twenty  years  to  run  and  bearing  interest  at  4%,  pay- 
able semi-annuaiiy,  varies  somewhat  with  the  state  of  the  money  market.  In  and 
following  the  panic  of  1907  the  best  bonds  showed  a  decline  of  from  five  to  ten 
per  cent.  If  mortgages  on  real  estate— or  the  title  to  real  estate— passed  from 
hand  to  hand  as  bonds  do  they  w^ould  have  shown  a  similar  depreciation.  Money 
was  worth  more,  hence  securities  were  worth  less.  But  a  life  company's  liabili- 
ties are  not  largely  cash  liabilities  —they  are  long-term  liabilities,  and  its  securi- 
ties are  bought  because  they  produce  income  and  the  principal  will  be  paid  at 
maturity.  In  view  of  these  things  and  in  order  that  the  rate  of  interest  shown 
should  be  the  effective  rate  received,  the  State  has  established  the  rule  that  a 
bond  that  is  ' '  amply  secured  and  not  in  default  as  to  principal  or  interest,  shall  be 
valued  as  follows :  If  purchased  at  par,  at  the  par  value ;  if  purchased  above  or 
below  par,  on  the  basis  of  the  purchase  price  adjusted  so  as  to  bring  the  value 
to  par  at  maturity  and  so  as  to  yield  meantime  the  effective  rate  of  interest  at 
which  the  purchase  was  made".* 

For  example,  a  4%  bond  bought  at  par  always  yields  4%  on  its  cost,  no 
matter  when  it  matures;  therefore  its  book  value  is  always  par.  But  a  31/2%  bond 
having  twenty  years  to  run  and  bought  at  93.16  per  cent,  also  yields  47c  ;  its  book 
value  must  therefore  be  "adjusted"  every  year.  To  do  this  the  Company  credits 
interest  account  with  4%  on  the  book  value  and  adds  the  difference  between 
4%  and  the  interest  actually  received  to  the  book  value.  These  additions  bring 
the  book  value  to  par  at  maturity.  On  the  other  hand,  a  41/2 7o  bond  having 
twenty  years  to  run  and  bought  at  106.84  per  cent,  also  yields  4%.  In  this  case 
the  Company  each  year  credits  interest  account  wnth  4%  on  the  book  value 
and  deducts  the  balance  from  the  book  value  of  the  bond.  These  deductions 
bring  the  book  value  to  par  at  maturity.  After  the  first  year  the  rate  is  reckoned 
on  the  new^  book  value. 

The  Branch  OfBce  debits  and  credits  represent  incomplete  transactions-  the 
Branch  Offices  (there  are  over  one  himdred  of  them)  have  received  the  money 
and  paid  it  out,  but  the  vouchers  have  not  been  received  or  have  not  beeu  ap- 
proved—they are  not  yet  entirely  matters  of  record.  Until  they  are  the  debit 
balances  are  not  "admitted  assets". 

The  "premiums  due  and  unreported"  represent  cases  where  the  policy- 
holder is  availing  himself  of  the  days  of  grace  in  the  payment  of  premium ;  those 
under  the  head  of  new^  business  represent  policies  upon  which  a  quarterly  or 
semi-annual  premium  has  been  paid,  as  a  new-  policy  is  not  in  force  until  the  first 
premium  has  been  paid.  The  deferred  premiums  represent  quarterly  and  semi- 
annual premiums  falling  due  in  1909  but  belonging  to  the  policy  year  beginning 
in  1908.  Premiums  are  theoretically  paid  annually  in  advance,  hence  four  quar- 
terly or  two  semi-annual  premiums  belong  to  the  year  1908,  although  some  were 
not  due  until  1909.  From  all  these  premiums  257f  is  deducted  as  loading  because 
under  the  law  the  Company  might  spend  about  this  sum  in  expenses.  The  total 
loading  on  gross  premiums  received  during  the  year  averaged  21.1  per  cent,  of 
gross  premiums,  as  per  Gain  and  Loss  Exhibit  in  report  to  the  State. 


See  Section  18  Insurance  Law,  Appendix. 


Studies  in  F radical  Life  Insurance  67 

It  will  be  noted  that  market  values  iu  excess  of  book  values  are  added  and 
book  values  in  excess  of  market  values  are  deducted.  This  is  done  rather  to 
make  the  statement  conform  to  that  required  in  other  States  and  countries  than 
as  a  test  of  real  values,  as  the  valuation  of  bonds  by  another  method  is— as  we  have 
seen— specifically  authorized  by  the  New  York  Insurance  Law. 

Liabilities— Valuation  of  Policies,  etc. 

The  New-York  Life  began  business  in  April,  1845,  and  has  been  a  growing- 
Company  ever  since.  On  December  31,  1908,  it  had  on  its  books  over  one 
million  policies  of  insurance  and  nearly  ten  thousand  annuity  contracts.  Natu- 
rally many  of  these  reach  back  to  years  when  other  laws  were  in  force  and  when 
policy  forms  were  very  different.  In  fact  the  different  kinds  of  policies  now  on 
the  Company's  books  furnish  a  history  in  miniature  of  life  insurance  during  the 
last  fifty  years.  The  oldest  Policy  in  force  is  number  620,  issued  in  1846,  and 
there  are  61  policies  in  force  that  are  over  fifty  years  old.  We  are  just  now  being 
reminded  that  fifty  years  ago  the  Civil  War  began  and  that  the  country  was  then 
in  a  turmoil  of  excitement.  Nevertheless  the  great  moral  and  economic  forces 
kept  at  work,  building  up  even  while  destructive  forces  were  tearing  down. 
There  is  no  more  stirring  chapter  in  the  history  of  the  Company  than  that  cover- 
ing the  period  1861-65,  during  which  time  its  business  increased  more  than  four- 
fold. 

For  purposes  of  valuation  all  policies  issued  prior  to  1901,  except  those 
bearing  3%  guarantees  (issued  ^ince  July,  1896),  were  grouped  together  and 
valued  by  the  Actuaries'  Table  of  Mortality  with  interest  at  4%— a  standard 
which  by  a  law  of  the  State  superseded  all  others  in  1880,  and  which  is  still  in 
force  for  such  policies.  Other  issues  either  follow  subsequent  laws  or  are  valued 
by  a  higher  standard  than  the  law  requires.  The  additional  reserve  set  aside 
in  excess  of  the  State's  requirements  was  $3,129,402,  and  will  be  found  in 
item  35.  After  an  exhaustive  examination  of  all  sources  of  information  on  the 
subject,  including  the  mortality  among  its  own  declined  risks  during  a  period  of 
twenty  years,  the  Company  began  in  1896  the  insurance  of  impaired  and  partially 
impaired  risks.  Upon  the  first  of  these  and  upon  tropical  insurances  the  Com- 
pany held  a  reserve  based  upon  a  mortality  double  that  of  the  American  Table 
with  3%  interest,  and  upon  the  second  and  upon  semi-tropical  insurances  it 
held  a  reserve  based  upon  a  mortality  once  and  a  half  that  of  the  American  Table 
with  3%  interest.  Annuities  were  valued  by  three  standards,  according  to  year 
of  issue— the  later  standards  representing  the  larger  experience.  This  immense 
amount  of  reserve— over  459  million  dollars  (it  is  now  over  522  millions)  is  made 
up  of  the  reserve  required  on  individual  contracts  similar  in  general  tenor  to  those 
which  we  have  analyzed  to  ascertain  their  present  values. 

The  liabilities  under  items  9  to  35  require  little  comment.  The  total  amount 
of  Policy  Claims  looks  large,  but  over  half  of  it  is  upon  losses  that  have  been 
reported  but  no  proof  of  death  received.  Under  item  12,  strike  out  the  words 
"or  adjusted  and  not  due".  When  a  New-York  Life  policy  claim  is  "adjusted" 
it  is  then  paid.  These  words  are  in  the  official  form  to  cover  policies  issued  years 
ago  under  which  a  death-loss  was  not  due  until  30  or  60  days  after  proof  was 
received.     The  New-York  Life  still  has  such  policies  in  force,  but  does  not  avail 


6S  Studies  in  Practical  Life  Insurance 

itself  of  the  privilejj:e  of  delay.  The  amount  of  death-claims  resisted  also  looks 
large  although  it  is  less  than  one  per  cent,  of  the  total  of  paid  and  resisted.  It 
includes  many  cases  carried  over  from  the  previous  year.  The  Company  must 
protect  its  policy-holders  from  fraudulent  claims.  Such  claims  are  reported  to 
the  Insurance  Department  in  detail  each  year,  and  upon  the  merits  of  its  defense 
the  Company  invites  the  closest  scrutiny.  Taking  the  first  ten  on  the  list  at  the 
end  of  1910,  the  Company's  reasons  for  resisting  payment  were  as  follows:  In 
three  cases — insurance  contract  never  consummated;  in  one  case — insured  not 
dead;  in  three  cases— insurance  benefits  had  expired  before  death— Company 
liable  in  one  case  for  a  surrender  value  which  it  is  ready  to  pay;  in  two  cases 
policies  lapsed  charged  with  loan — were  endorsed  for  paid-up  value  less  the  debt, 
which  the  Company  is  ready  to  pay— one  of  these  had  been  decided  in  favor  of 
the  Company  and  an  appeal  taken;  in  one  case— fraud  in  procuring  Policy. 

The  due  and  unpaid  endowments  and  annuities  are  mostly  those  upon  which 
checks  had  been  sent  out  but  they  had  not  come  back.  The  Company  formerly 
waited  for  a  claim  to  be  made  under  endowment  and  annuity  contracts,  but 
some  fifteen  or  more  years  ago  it  devised  a  form  of  check  the  endorsement  and 
payment  of  which  furnish  the  needed  proof  that  the  Beneficiary  is  alive.  Such 
checks  are  now  sent  out  so  as  to  reach  the  Beneficiaries  on  or  about  the  due  date. 

Item  27  shows  a  large  amount  due  in  taxes.  Taxes  are  levied  on  the  business 
of  the  year,  but  are  mostly  due  and  payable  in  the  following  year  when  the  totals 
have  been  made  up. 

To  the  special  surplus  funds  included  in  item  35  there  has  since  been  added 
an  "annual  dividend  equalization  fund".  Since  the  Company  began  to  pay 
annual  dividends  on  its  new  contribution  annual  dividend  policies  it  has  declared 
and  paid  the  following  percentages  of  the  surplus  normally  accruing  on  such 
policies:  For  1907,  100%;  for  1908,  96%;  for  1909,  97%;  for  1910,  100%. 
The  purpose  is  to  lay  by  a  little  from  the  more  prosperous  years  in  order  to 
maintain  a  normally  increasing  dividend  as  the  policies  grow  older,  as  explained  in 
the  preceding  chapter.  This  fund  now  ( 1911 )  amounts  to  $387,532.  The  reserve  for 
Nylic  contracts  is  the  present  value  of  certain  agents'  contracts  and  will  be  more 
fully  explained  in  the  chapter  describing  Agency  Methods. 

Reports  to  Other  States. 

While  the  Convention  of  Insurance  Commissioners  adopted  some  years  ago 
a  standard  form  of  report,  the  differing  laws  of  various  States  make  additional 
information  necessary  in  some  of  them.  Illinois,  Massachusetts,  New  Jersey,  Ohio 
and  the  District  of  Columbia  require  the  report  of  new  business  and  of  insurance 
in  force  to  be  on  the  basis  of  "policies  issued"  instead  of  on  the  basis  of  "policies 
paid  for".  .Massachusetts  requires  a  record  of  individual  policies  and  makes  a 
seriatim  valuation.  Wisconsin  requires  (1)  a  schedule  of  each  audit  of  the  Com- 
pany's affairs  showing  cost,  (2)  a  schedule  showing  the  bonds  given  by  officers 
and  employees,  (3)  a  special  gain  and  loss  exhibit  of  non-participating  policies, 
(4)  a  salary  schedule  showing  all  salaries  of  $3,000  or  over,  (5)  a  schedule  show- 
ing in  detail  amounts  paid  as  legislative  expenses,  (6)  a  schedule  of  lapsed  poli- 
cies on  which  loans  have  been  made,  (7)  a  loan  schedule  classified  according  to 


Studies  i)i  Pnicticul  Life  lusiuancc  69 

interest  rates,  (8)  a  Wisconsin  policy  loan  schedule,  (9)  a  \Visc()nsin  dividciid 
schedule.  The  Company  is  also  required  to  scud  to  holders  of  deferred  dividend 
policies  in  Wisconsin  a  statement  showing-  their  contingent  interest  in  the  deferred 
dividend  fund.  Idaho  requires  the  table  showing  cash  and  loan  values,  paid-up 
and  extended  insurance  of  Ordinary  Life  policies  to  be  extended  to  age  9(1  The 
following  requirements  are  made  by  one  or  more  States,  and  many  of  them  are 
made  by  all: 

A  life  insurance  company  must  tile  a  certified  copy  of  its  charter  and,  annu- 
ally, a  statement  of  its  business  and  condition  on  the  31st  day  of  December  next 
preceding,  in  such  form  as  the  insurance  official  of  the  State  may  prescribe. 

It  must  satisfy  the  insurance  ofificial  of  the  State  that  it  is  lawfully  organized 
and  has  complied  with  the  laws  of  its  Home  State,  and  that  it  has  on  deposit  with 
the  financial  officer  of  its  Home  State  securities  worth  at  least  $100,000 ;  in  some 
cases  additional  deposits  are  required  in  the  State  where  the  company  seeks  to 
do  business. 

It  must  procure  from  the  insurance  official  his  certificate  of  compliance  with 
the  laws,  and  publish  reports  or  abstracts  thereof  with  the  certificate,  in  the 
manner  prescribed,  and  file  evidence  of  such  publication.  Its  annual  statement 
must  include  data  sufficient  to  enable  State  insurance  officials  to  make  a  valua- 
tion of  its  policy  liabilities,  or  it  must  furnish  a  certificate  of  such  valuation  from 
the  insurance  official  of  its  own  State. 

It  must  appoint  a  resident  of  the  State  its  attorney  upon  whom  legal  process 
may  be  served ;  in  some  States  such  attorney  must  be  appointed  in  each  county 
where  the  company  does  business ;  in  some  States  each  agent  must  be  an  attorney 
for  service. 

It  must  furnish  lists  of  its  agents  within  the  State,  who  must,  in  many 
States,  be  residents  thereof;  such  agents  must  file  copies  of  their  appointments 
and  procure  licenses,  and  their  books  must  be  open  to  the  inspection  of  tax 
officers. 

It  must  give  bonds  that  it  and  its  agents  will  comply  with  the  laws  and  pay 
taxes  as  imposed,  and  reports  must  be  made  to  tax  officers  of  premiums  received 
and  schedules  of  policies  in  force. 

It  must  allow  an  examination  of  its  affairs  to  be  made  whenever  deemed 
expedient  by  the  insurance  officials  of  the  States  where  it  does  business,  and  pay 
the  expense  of  such  examinations. 

It  must  make  its  investments,  as  prescribed  by  law,  in  certain  securities,  and 
of  the  value  of  these  securities  and  of  the  real  estate  owned  by  the  company,  the 
insurance  official  is  made  the  final  judge. 

It  must  file  with  the  State  official  copies  of  all  its  policy  forms;  its  policies 
must  have  attached  thereto  copies  of  all  documents  referred  to  therein* and  made 
a  part  thereof ;  they  must  be  so  fully  described  in  large  type  on  their  face  that 
the  holder  shall  not  be  likely  to  mistake  their  nature  or  scope;  they  must  be 
subject  to  the  courts  of  the  State  wherein  the  Policy  was  issued;  rebates  of 
premium  or  other  discrimination  between  insurants  of  the  same  class  or  expecta- 
tion of  life  must  not  be  made;  and  some  States  restrict  their  own  companies,  in 
the  matter  of  reinsurance,  to  one-half  the  amount  of  the  risk,  except  by  consent 
of  the  insurance  official. 


70  Studies  in  Practical  Life  Insurance 

It  must  require  medical  examinations,  and  the  certificate  of  its  medical 
examiner  that  an  applicant  was  insurable  according  to  the  company's  rules  may 
bar  the  company  from  pleading  that  the  insured  was  not  in  the  state  of  health 
required  by  the  company. 

It  must  pay  all  claims  and  judgments  within  a  specified  time;  it  must  allow 
a  specified  time  for  the  beginning  of  an  action;  if  it  pleads  misrepresentation, 
it  must  deposit  the  premiums  received  in  court  prior  to  the  trial  of  the  case; 
statements  made  in  an  application  must  be  deemed  true  after  the  lapse  of  a 
specified  time;  statements  of  the  applicant  are  to  be  considered  as  representa- 
tions and  not  as  warranties;  misrepresentations  are  not  to  void  a  Policy  unless 
the  matter  misrepresented  shall  actually  contribute  to  the  contingency  or 
event  on  which  the  Policy  is  to  become  due  and  payable ;  suicide  is  not  allowed 
to  void  a  Policy  unless  it  was  contemplated  when  the  insurance  was  taken  and 
sometimes  not  at  all ;  intemperate  habits  are  not  allowed  to  void  a  Policy  if  such 
habits  were  generally  known  where  premiums  were  paid  and  the  company  con- 
tinued to  receive  premiums  on  the  Policy. 

It  must,  unless  its  policies  expressly  contract  otherwise,  allow  paid-up  or 
term  insurance  in  case  of  lapse  after  a  specified  number  of  annual  premiums 
have  been  paid,  and  policies  may  not  be  lapsed  for  non-payment  of  premium 
unless  notice  of  the  due  date  thereof  shall  have  been  given  within  a  time  pre- 
scribed. 

Reports  to  Foreign  Governments. 

All  the  reports  to  foreign  governments  differ  somewhat  in  detail  from 
those  furnished  the  States  of  the  Union  and  some  are  required  to  be  made  with 
great  fullness  of  detail  according-  to  the  scope  and  plan  of  the  particular  coun- 
tries. All  are  made  in  the  money  of  the  country,  and  some  in  American  money 
also.  Those  which  involve  most  labor  are  the  Austrian,  the  British,  the  Canadian, 
the  German,  the  Japanese,  the  Mexican  and  the  Swiss.  We  give  below  a  resume 
of  the  German,  which  will  serve  as  an  example  of  the  "permutations  and  com- 
binations" to  which  the  various  details  may  be  subjected: 

The  amount  of  income  and  disbursement  is  in  a  form  known  abroad  as  Profit 
and  Loss  Account,  because  everything  is  brought  to  a  completed  condition— a 
condition  which  shows  the  profit  or  the  loss  on  the  j^ear's  business.  The  amount 
brought  forward  from  the  previous  year's  report,  after  all  adjustments  had  been 
made,  is  entered  in  the  new  report  in  some  detail— as  premium  reserves,  reserves 
for  pending  insurance  claims,  profit  reserve  of  the  insured  and  increase  of  same 
from  surplus  of  previous  year,  other  reserves  set  aside  for  various  purposes  and 
increase  of  same  from  surplus  of  previous  year.  The  premium  income  includes 
all  premiums  belonging  to  the  year,  whether  received  during  the  year  or  not, 
premiums  deferred  from  the  previous  year  and  premiums  paid  in  advance  being 
<\x('luded.  Income  from  securities  is  treated  in  the  same  manner,  interest  earned 
during  the  year  being  taken,  no  matter  when  received,  and  rents  from  real  estate 
being  net,  after  payment  of  taxes  and  expenses. 

In  disbursements,  payments  on  claims  of  the  preceding  year  are  carefully 
distinguished  from  payments  on  claims  incurred  during  the  year,  and  the  amount 
remaining  unpaid  in  each  class  is  carried  into  the  total.     The  same  method  is 


Studies  in  Practical  Life  Insurance.  71 

pursued  with  respect  to  (livideiuls  and  ciidowinciils.  Amounts  paid  for  re-insur- 
ances are  treated  as  disbursements.  Re-insurance  is  treated  as  any  other  business 
operation,  the  company  being-  credited  with  all  it  receives  and  charged  with  all  it 
expends  in  the  process. 

In  "Expenses  of  Administration",  first  year's  conunissions  include  all 
moneys  paid  and  indebtedness  incurred  to  individuals  for  procuring  new  busi- 
ness. Renewal  commissions  include  amounts  paid  for  renewals  and  in  commuta- 
tion of  renewals,  and  any  increase  in  the  indebtedness  of  agents.  "Other  Ex- 
penses of  Administration"  are  analyzed  in  a  supplement  under  a  dozen  different 
headings.  Profit  and  Loss  items,  on  both  sides  of  the  account,  pertaining  to 
investments  in  securities,  are  derived  from  a  schedule  called  "Movement  of 
Securities".  The  schedule  covers  some  thirty  columns,  many  of  which  are  com- 
pletely filled  in  every  case. 

Having  thus  included  in  Disbursements  everything  which  made  for  loss 
during  the  year,  the  exhibit  continues  with  a  statement  of  premium  reserves  and 
of  specific  reserves  not  to  be  increased  from  the  profits  of  the  year  Then  a  state- 
ment is  given  of  profit  reserves  and  of  other  reserves,  for  special  purposes,  which 
are  subject  to  adjustment  when  apportionment  is  made  of  the  profits  of  the  year. 
When  this  is  done  and  a  balance  struck,  we  have  the  net  profits  of  the  year,  the 
disposal  of  which  is  noted  under  appropriate  heads. 

The  balance  sheet  is  very  much  like  our  own. 

The  items  which  have  appeared  in  this  summarized  form  are  now  taken  up 
and  traced  back  to  their  source,  and  compared  with  other  items  to  which  they  are 
most  closely  related.  In  a  schedule  called  "Distribution  of  Premium  Income 
and  Payment  of  Losses",  required  for  participating  and  non-participating  poli- 
cies, respectively,  premiums  received,  amount  of  losses  and  of  surrender  values 
paid,  and  the  amount  reserved  for  claims  unpaid  are  all  reported  under  various 
categories  of  insurance  and  kinds  of  policies.  Considerations  received  for  annui- 
ties are  treated  in  the  same  manner,  so  far  as  the  method  is  applicable. 

The  death-losses  are  taken  up  in  mortality  schedules  showing  the  total  actual 
mortality  as  compared  with  the  expected:  (1)  on  the  entire  business,  (2)  in  the 
general  class,  (3)  in  the  class  of  partially  impaired  lives,  (4)  in  the  class  of 
impaired  lives,  (5)  in  the  tropical  class,  (6)  in  the  semi-tropical  class,  (7)  annui- 
ties on  male  lives,  and  (8)  annuities  on  female  lives.  These  eight  schedules  show 
the  mortality  of  insured  and  annuitants  by  number  of  persons  and  by  amounts, 
grouped  according  to  year  of  birth  of  the  insured  or  the  annuitant,  the  actual 
mortality  being  compared  with  the  expected,  at  each  age.  This  makes  in  the  case 
of  insured  persons,  seventy-eight  groups  in  each  of  six  schedules,  and  in  the  case 
of  annuitants  ninety-four  groups  in  each  of  two  schedules,  with  all  the  details 
necessary  to  deduce  the  actual  and  the  expected  mortality  for  each  group. 

The  same  death-losses  are  also  taken  up  in  six  schedules  entitled  "Financial 
Result  of  the  mortality  in  the  business  year".  These  schedules  show,  for  each 
of  the  eight  classes  just  enumerated,  what  provision  for  the  death-losses  was 
made  from  (1)  reserves,  (2)  costs  of  insurance,  and  (3)  amounts  received  from 
re-insuring  companies;  and  consequently,  what  the  profit  or  the  less  from  mor- 
tality amtmnted  \o  in  tlie  several  classes. 


72  Studies  in  Prdctical  Life  Insurance 

The  amount  paid  in  Dividends,  and  the  amount  set  apart  as  Profit  Reserves 
for  the  payment  of  dividends  at  the  end  of  specified  periods,  are  made  the  sub- 
jects of  searching  analysis.  A  schedule  called  "Distribution  of  Profits  and  Move- 
ment of  Profit  Reserves"  shows  the  amounts  insured  under  each  of  seven  classes 
of  participating  policies,  divided  according  to  dividend  periods.  The  amount 
paid  in  each  class  is  shown ;  and  in  classes  with  dividend  periods  longer  than  one 
year,  the  amounts  of  profit  reserve  from  the  previous  year,  with  additions  from 
surplus,  are  also  shown. 

In  order  to  arrive  at  the  figures  shown  in  this  schedule  for  policies  with 
dividend  period  of  more  than  one  year,  such  policies  are  shown  in  85 
groups  according  to  class  and  year  of  issue,  with  the  amounts  insured  and  the 
movement  of  the  profit  reserve  during  the  year.  These  exhibits  of  policy-groups 
will  in  time  (they  were  begun  in  1899  and  include  20-year  deferred  dividend 
policies)  show  the  history  of  each  class  of  deferred  dividend  policies  from  the 
year  of  issue  until  the  year  of  maturity.  The  particulars  required  in  the  case  of 
maturing  groups  are— 

1.  Amount  insured  at  time  of  distribution,  with  reserve  on  same, 

2.  Total  income  from  premiums  to  time  of  distribution. 

3.  Total  income  from  interest  to  time  of  distribution. 

4.  Total  disbursements  of  losses. 

5.  Total  disbursements  for  commissions  and  expenses  of  administration. 

6.  Total  disbursements  for  surrender  values. 

7.  Profit  fund  on  hand  for  distribution. 

8.  Total  amount  of  premiums  on  which  this  fund  is  to  be  apportioned. 

The  Policy  schedules  are  four  in  number,  two  for  participating  and  two  for 
non-participating  insurance.  The  two  which  describe  the  "]\Iovement  of  Out- 
standing Insurance"  are  similar  to  our  own;  while  two  others  show  the  amounts 
insured,  the  net  annual  premiums,  and  the  premium  reserves  for  the  year,  under 
each  of  eleven  different  forms  of  Policy. 

This  exhibit  of  the  business  as  a  whole  is  supplemented  by  an  exhibit  of  the 
German  business  sufficiently  elaborate  to  show  its  magnitude,  cost,  amounts  paid 
and  general  condition. 

The  labor  incident  to  the  preparation  of  annual  reports  falls  chiefly  upon  the 
Actuaries'  Department,  the  Treasury  Department  and  the  Division  of  Policy 
Claims.  These  departments  contain  about  250  employees  and  the  extra  time  work 
required  is  about  18,000  hours,  an  average  of  72  hours  extra  work  for  the  entire 
force. 


CHAl'TER  IV. 

AGENCY  ORGAMZATlOxX   AM)  METHODS. 


The  Branch  Op^fice  System. 


AVhile  a  strictly  logical  method  would  perhaps  have  placed  this  eliapter  first, 
it  was  thought  that  the  reader  would  be  more  interested  in  how  the  business  was 
obtained  after  a  little  study  of  the  business  itself.  Life  insurance,  as  we  have 
seen,  consists  in  the  co-operation  of  a  large  number  of  persons  under  well  defined 
contracts,  for  the  purpose  of  distributing  the  pecuniary  losses  caused  by  pre- 
mature death.  Incidentally  it  becomes  a  plan  for  the  accumulation  of  money 
for  those  who  live  long :  the  main  fact  is  the  co-operation  of  the  insured.  How 
best  to  secure  this  co-operation  is  one  of  the  chief  problems  of  the  life  insurance 
manager.  J\Iany  insurance  organizations  are  able  to  handle  safely  and  wisely  the 
business  they  obtain,  but  they  obtain  comparatively  little,  hence  their  value  to 
society  is  small.  The  useful  company  is  the  company  that  insures  many  lives 
and  makes  the  benefits  of  life  insurance  effective  to  many  persons. 

The  early  method  followed  by  all  companies  was  the  General  Agency 
method.  A  General  Agent  was  given  control  of  certain  territory,  and  allowed 
to  appoint  sub-agents  who  procured  most  of  the  business.  The  company  paid 
the  General  Agent  for  all  business  turned  in,  and  he  in  turn  compensated  the 
sub-agents.  Under  this  system  only  a  few  men  do  business  directly  with  the 
Home  Office— the  business  is  practically  farmed  out  to  the  General  Agents.  If 
they  are  lazy,  incompetent,  or  disgruntled,  the  company  gets  comparatively  little 
business  from  their  territory.  If  they  die,  or  resign,  or  stop  business  for  any 
other  reason,  a  new  General  Agent  must  be  appointed  and  the  business  re- 
organized. The  sub-agents— the  men  who  do  the  hard  work— are  not  properly 
encouraged,  taught  or  compensated. 

After  an  experience  of  nearly  fifty  years  with  the  General  Agency  system 
the  New- York  Life  began  to  take  back  the  territory  farmed  out  to  General  Agents 
and  to  establish  the  Branch  Office  system.  This  change  was  completed  in  1903, 
and  the  Company  is  now  represented  in  all  the  chief  business  centers  of  the 
world  by  its  own  Branch  Offices.  Each  office  is  in  charge  of  an  Agency  Director 
and  a  Cashier,  who  are  appointed  by  the  Company.  They  are  paid  a  salary 
according  to  the  work  they  do  and  according  to  the  economy  with  which  they 
conduct  the  affairs  of  their  office.  The  Agency  Director  is  in  charge  of  the 
territory  attached  to  the  office,  finds  new  agents,  makes  contracts  with  them, 
instructs  them  in  their  duties,  and,  when  occasion  requires  it,  recommends  the 
termination  of  their  contracts.  All  agents'  contracts  are  made  direct  Avith  the 
Company  and  subject  to  its  approval.  Every  agent  is  attached  to  the  Branch 
Office  of  the  territorv  in  which  he  works  and  reports  to  it. 


74  Studies  in  Practical  Life  Insurance 

The  Cashier  has  charge  of  the  inside  affairs  of  the  Branch  Office— of  the 
books,  the  correspondence  and  the  clerical  force.  He  makes  a  daily  report  of  all 
financial  transactions,  accounting  for  all  money  received -and  disbursed,  this 
report  being  mailed  at  the  close  of  each  day's  business.  He  also  makes,  on 
behalf  of  the  Agency  Director,  a  monthly  statement,  showing  in  detail  the  work 
of  each  agent  attached  to  the  Branch.  All  business  is  carefully  examined  for 
errors  or  incompleteness  before  it  is  sent  to  the  Home  Office,  and  is  sent  in  special 
envelopes  according  to  the  character  of  the  business,  in  order  to  facilitate  distri- 
bution when  it  arrives.  The  records  of  each  office  are  complete  with  respect  to 
the  business  passing  through  it,  and  they  are  in  respect  to  completed  business 
(iuplicated  at  the  Home  Office,  so  that  in  case  of  fire,  accident  or  theft  no  em- 
barrassment will  result.  The  fixed  charges  of  a  Branch  Office  may  be  terminated 
on  thirty  days'  notice,  and  if  an  office  is  discontinued  there  are  no  commissions 
to  be  paid  to  a  General  Agent. 

Advantages  of  the  Branch  Office  System. 

The  Branch  Office  system  accomplishes  three  desirable  ends:  (1)  It  places 
the  field  work  and  agency  expenses  absolutely  under  control  of  the  Home  Office ; 
(2)  it  brings  the  men  who  obtain  the  business  into  close  touch  with  the  Home 
Office;  (3)  it  places  the  facilities  and  conveniences  of  the  Home  Office  within 
reach  both  of  agents  and  of  the  insured.  It  secures  a  constant  supervision  of 
the  agents'  work  by  trained  men  who  are  on  the  spot  with  opportunity  to  advise. 
Every  agent's  contract  is  with  the  Company;  a  careful  record  of  each  man's 
business  is  kept  at  the  Home  Office— not  only  of  how  much  bu.siness  he  secures, 
but  of  how  steadily  he  works  and  how  well  his  business  stays  on  the  books.  All 
necessary  correspondence  is  conducted  for  him,  leaving  him  free  to  devote  all 
his  time  to  securing  business.  To  the  policy-holders  in  its  territory  the  Branch 
Office  is  practically  the  Company.  Here  they  pay  premiums  and  secure  loans, 
and  here  are  paid  to  them  the  various  benefits  which  arise  under  their  policies. 

In  order  the  better  to  secure  oversight  of  the  field  work  the  Company  groups 
the  territory  of  its  various  Branch  Offices  into  Departments,  each  of  which  is 
under  the  general  supervision^  of  an  Inspector  of  Agencies,  or  a  Supervisor.  The 
Supervisors  and  Inspectors  are  usually  men  who  have  been  markedly  successful 
as  Agency  Directors— men  of  strong  personal  character  who  have  the  faculty  of 
inspiring  others;  men  who  thoroughly  understand  the  business  and  are  usually 
large  personal  writers— men  qualified  to  lead  and  to  help  others.  The  Agency 
force  of  the  Company  has  thus  come  to  be  a  compact  organization— something  like 
an  army— which  is  always  in  close  touch  with  the  Home  Office. 

The  Official  Examiner  of  the  Insurance  Department  said  in  his  report  of  an 
examination  of  the  Company  made  in  1908:  "The  business  of  this  Company  is 
conducted  under  the  Branch  Office  system,  in  contrast  with  the  General  Agency 
system.  The  Company  deals  with  Branch  Office  Cashiers,  who  are  paid  salaries, 
and  the  polioy-liolder  after  the  second  year,  deals  almost  wholly  with  the  Branch 
OfPce  Cashier,  and  is,  therefore,  to  that  extent,  divorced  from  the  agency  de]>art- 
ment  and  the  producing  part  of  the  business.  This  fact  is  one  of  the  elements 
which  has  brought  tho  Company  to  its  present  low  expense  rate,  referred  to  later. 


studies  ill  Practical  Life  Insurance  75 

I'ractically  little  of  the  Company's  business  is  therefore  mortgaged  for  renewal 
commissions. ' ' 

The  Nylic  Association. 

In  order  further  to  cultivate  an  esprit  de  corps  the  Company  organized 
in  1895  the  "Nylic  Association".  The  word  "Nylic",  formed  from  the  initial 
letters  of  the  name  of  the  Company,  had  long  been  in  use  as  the  Company's  cable 
word  at  New  York ;  it  was  now  to  designate  a  composite  class  of  New- York  Life 
agents,  each  with  a  definite  standing  based  upon  length  of  service  and  amount 
of  business  done.  Good  standing  in  the  association  was  also  to  carry  certain 
emoluments,  which  would  make  it  worth  while  for  an  agent  to  continue  with  the 
Company  for  life  and  to  maintain  a  high  standard  of  production.  The  question 
has  long  been  mooted:  "Is  the  life  agent's  work  a  profession?"  Other  pro- 
fessions are  made  up  of  men  who  have  passed  certain  prescribed  examinations; 
but  every  profession  at  the  outset  is  composed  of  men  who  have  achieved  certain 
results.  The  Nylic  Association  established  a  class  of  life  insurance  agents,  based 
upon  steady  production,  upon  loyalty  to  their  own  Company,  and  upon  prin- 
ciples and  methods  which  bring  cumulative  benefits  to  all  who  follow  them. 

The  Association  is  composed  of  five  classes  called  respectively— Freshmen 
Nylics,  Nylics  of  the  first,  second  and  third  degrees,  and  Senior  Nylics.  The 
period  of  membership  in  each  of  the  first  four  classes  is  five  years.  The  con- 
ditions of  membership  were  first  made  easy — a  man  must  w^rite  and  pay  for  at 
least  $25,000  in  new  business  during  each  year.  In  1899  the  requirement  was 
made  $50,000  of  paid-for  business.  After  two  years'  service  the  "Freshman 
Nylic"  begins  to  receive  extra  compensation  upon  the  business  w'ritten  two 
years  before — that  is  still  on  the  books  of  the  Company!  Nylics  of  the  first, 
second  and  third  degrees  receive  extra  compensation  each  j-ear  based  upon 
the  business  written  five  years  previously  and  still  remaining  on  the  books 
of  the  Company,  the  extra  compensation  being  at  a  higher  rate  for  each 
degree  attained..  After  a  service  of  twenty  years  the  Senior  N>lie  is  guar- 
anteed compensation  for  life,  provided  he  does  not  enter  the  service  of  any  other 
company,  this  compensation  being  based  upon  an  average  of  his  several  income 
bases  during  the  first  fifteen  years,  and  the  business  remaining  on  the  books 
from  the  year  in  which  his  production  was  smallest  while  a  Nylic  of  the  third 
degree.  Certain  provision  is  also  made  for  drawing  Nylics  who  become  totally 
incapacitated. 

The  Elimination  of  Waste. 

The  general  effect  of  the  Nylic  system  has  been  to  eliminate  ivaste  from  the 
business— waste  of  time  and  energy  in  securing  and  instructing  agents,  and  waste 
of  money  in  writing  business  that  did  not  prove  permanent.  To  keep  his  member- 
ship in  Nylic  an  agent  must  secure  an  average  of  about  $1,000  per  week  during 
each  year ;  he  must  remain  with  the  Company  at  least  three  years  in  order  to  re- 
ceive extra  compensation;  such  extra  compensation  always  depends  upon  the 
amount  of  his  business  that  remains  on  the  books.  He  is  working  for  a  permanency ; 
he  works  more  steadily ;  the  longer  he  represents  the  Company  the  more  efficient 
he  becomes.     The  standard  is  not  so  high  as  to  discourage  any  man  who  is  going 


7(j  Studies  in  Practical  Life  Insurunce 

to  make  a  business  of  life  insurance;  but  is  high  enough  to  weed  out  the  incom- 
petent and  the  unworthy. 

Under  Section  97  of  the  Insurance  Law  as  originally  enacted,  in  1906,  the 
Company  was  not  allowed  to  add  any  new  members  to  its  Nylic  Association,  but 
old  contracts  were  not  invalidated.  AVhen  the  Company  was  examined  by  the 
Insurance  Department  in  1908,  the  official  examiner  commended  the  system  as 
"highly  beneficial  both  to  the  agent  and  to  the  Company.  The  benefit  to  the 
Company",  he  said,  "was  three-fold.  It  provided  a  more  economical  plan  than 
the  renewal  connnission  basis.  It  made  the  interest  of  the  Company  the  interest 
of  the  agent,  and  it  won  for  itself  a  reputation  for  reliability  and  responsibility 
in  each  community  where  the  persistent  agent  was  located.  No  other  factor,  in 
my  opinion,  has  contributed  more  to  the  economical  management  of  this  Com- 
pany than  its  'Nylics',  and  it  is  a  matter  to  be  regretted  that  it  cannot  be  carried 
on  with  new  agents."  Being  thus  advised,  the  Insurance  Superintendent  in 
1910  recommended  a  modification  of  Section  97  which  was  amended  by  inserting 
the  following  words:  "If  any  such  corporation  shall  compensate  its  agents  or 
any  of  them,  after  the  first  insurance  year,  in  Avhole  or  in  part,  upon  any  other 
plan  than  commissions  and  collection  fees,  the  aggregate  sum  so  paid  shall  in  no 
year  exceed  the  limitations  herein  imposed,  and  the  schedule  and  plan  of  such 
compensation  shall  be  submitted  to  and  approved  by  the  superintendent  of 
insurance. ' ' 

Under  this  amendment  the  Company  has  since  established  "Nylic  No.  2." 
There  are  now  522  members  of  the  original  Nylic,  and  651  members  of  Nylic 
No.  2. 

Insurance  Clubs. 

In  further  pursuance  of  its  purpose  to  organize  and  maintain  an  agency  force 
which  would  make  the  business  of  Life  Insurance  a  profession,  with  certain  stand- 
ards of  achievement,  and  with  certain  ethical  standards  governing  the  conduct  of 
the  business, — the  Company  has  established  two  classes  of  Insurance  Clubs. 
The  $100,000  Club  and  the  $200,000  Club.  Any  agent  Avorking  in  North  America 
who  writes  and  pays  the  premiums  on  $100,000  or  more  (but  less  than  $200,000) 
of  new  business  under  club  rules  and  within  the  club  year  thereby  becomes 
a  mcmbci-  of  the  $100,000  Club;  any  agent  who  secures  and  pays  the  first 
year's  premiums  on  $200,000  or  more,  under  clul)  rules  and  within  the  club 
year,  becomes  a  mendjer  of  the  $200,000  Chili. 

The  $100,000  Club  had  for  the  club  year  ending  in  1910  a  meml>ership  of 
242,  and  their  total  business  for  the  club  year  was  $30,609,738.  The  $200,000 
Club  had  for  the  same  period  a  membership  of  138  and  their  total  business  for 
the  club  year  was  $37,653,715.  No  additional  emoluments  attach  to  membership 
in  these  clubs,  but  the  honors  of  the  organizations  go  to  the  largest  writers.  A 
secretary  of  the  clubs  keeps  a  careful  record  of  each  member's  work,  and  the 
honors  are  announced  in  the  "Hulletin",  which  goes  to  all  agents  of  the  Com- 
pany. The  club  rules  are  framed  in  the  spirit  of  justice  to  intending  insurers 
and  of  loxalty  1o  the  Coiiip;in\.  ami  ai-c  enforced  by  the  club  spirit.  An  execu- 
tive commiltcc  is  iiivcii  power  lo  expel  any  member  who  shall  be  deemed  unfit 
for  membership,  .-iiid  llie  Coinpjiiiy  on  ils  |.;irl   jiledges  itself  thai  any  nieinher 


.  Studies  i)i  Prdcfical  Life  Insurance  77 

exiielled  for  cause  shall  theueeforth  fiucl  no  place  in  the  agency  ranks  oi'  the 
New-York  Life. 

The  Nylic  Association  and  the  insurance  clubs,  supplemented  by  the  weekly 
"Bulletin"  from  the  Home  Office  have  imparted  a  strong  mental  impulse  and 
a  high  moral  tone  to  the  Company's  agency  force.  The  bases  of  a  profession 
have  been  established,  both  in  standards  of  achievement  and  in  the  ethics  that 
should  control  men  in  the  conduct  of  a  noble  business.  Educated  sentiment  has 
been  found  to  be  a  subtle  and  far-reaching  power.  It  secures  more  work  and 
better  work  than  the  mere  love  of  gain ;  while  at  the  same  time  it  enhances  the 
earning  power  of  those  who  devote  their  lives  in  a  generous  spirit  to  the  pro- 
fession of  Life  Insurance. 

Three  of  the  most  successful  fieldmen  have  recently  been  appointed  "Agents' 
Counselors ' ',  or  special  advisers  to  members  of  the  $100,000  and  $200,000  Clubs. 
These  men  have  been  in  the  service  of  the  Company  for  more  than  twenty-five 
years  and  each  has  a -phenomenal  record,  both  with  respect  to  amount  of  business 
done  and  methods  of  doing  it. 


The  Weekly  Bulletin. 

There  is  issued  every  week  from  the  Home  Office  a  "Bulletin",  containing 
words  of  encouragement,  suggestion  and  instruction  respecting  the  business  of 
the  Company.  History  and  experience  and  every-day  life  are  searched  for  the 
sentiment  and  the  argument  that  will  move  men;  and  the  "Bulletin"  is  filled 
with  helps  of  the  most  valuable  kind,  and  with  incentives  of  the  highest  order. 
The  best  thought  of  every  one  connected  with  the  Company,  from  the  President 
down,  is  not  considered  too  good  to  be  laid  before  the  field  force  every  Monday 
morning;  while  members  of  that  force,  in  their  turn,  furnish  valuable  thoughts 
for  their  co-workers  at  the  Home  Office. 


CHAPTER  V. 

HOME  OFFICE  ORGANIZATIOIV  AND  METHODS. 

The  business  of  the  New- York  Life  now  includes  over  one  million 
separate  contracts,  an  income  of  o^er  one  hundred  million  dollars  per  year, 
disbursements  to  the  amount  of  sixty  millions,  the  investment  of  forty  millions, 
and  the  care  of  six  hundred  millions  of  accumulated  funds.  In  this  chapter 
we  shall  endeavor  to  show  how  such  a  vast  and  complicated  business  is  carried 
on  with  order,  accuracy  and  dispatch. 

Control  by  Trustees  Through  Committees. 

The  Company  is  a  purely  mutual  organization— no  one  has  a  vote  except 
the  insured  members — and  these  elect,  under  careful  provisions  of  law,  a 
Board  of  Trustees,  who  have  supreme  control  of  the  Company's  affairs.* 
They  elect  the  Executive  Officers,  adopt  By-Laws  defining  the  duties  of  officers 
and  of  standing  committees  of  the  Board,  and  meet  monthly  to  hear  and  act  upon 
the  reports  of  officers  and  committees.  The  standing  committees  are  as 
follows : 

1.  A  Finance  Committee,  consisting  of  seven  Trustees  and  the  Treasurer 
of  the  Company  having  supervision  of  the  funds  and  investments.  No  loan 
or  purchase  is  made  without  the  approval  of  every  member  present. 

2.  An  Executive  Committee,  consisting  of  seven  Trustees  and  a  Vice- 
President,  which  supervises  all  expenditures  other  than  those  specifically 
assigned  to  some  other  committee  by  the  By-Laws.  In  January  it  reports  to 
the  Board,  for  its  approval,  the  rules  and  methods  under  which  such  expendi- 
tures are  to  be  made  during  the  ensuing  year. 

3.  An  Agency  Committee  of  seven  Trustees  and  a  Vice-President,  which 
controls  the  appointment  and  compensation  of  all  Inspectors  of  Agencies, 
Supervisors,  ]Managers,  Agency  Directors  and  fieldmen. 

4.  A  Loss  Committee  of  four  Trustees,  the  Secretary  of  the  Company, 
one  of  the  General  Counsel,  and  the  Superintendent  of  Policy  Claims,— which 
supervises  the  payment  of  death-losses. 

5.  An  Auditing  Committee  of  three  Trustees,  the  Secretary,  a  Comptroller, 
a  General  Counsel  and  an  Auditor,— which  audits  all  disbursements  for  ex- 
penses. This  Committee  employs  a  chartered  accountant  who  is  under  the 
control  and  direction  of  the  Committee  and  reports  to  it  and  not  to  any  Officer 
of  the  Company. 

6.  An  Office  Committee  of  three  Trustees,  all  the  Vice-Presidents,  the 
Secretary  and  the  Treasurer, — which  regulates  all  matters  of  administration 
not  otherwise  provided  for  in  the  By-Laws. 

At  the  beginning  of  each  year  each  of  these  Committees,  except  the 
Finance  Committee,  prepares  Rules  and  Regulations  for  the  transaction  of  the 
particular  business  coming  under  its  control.    These  Rules  and  Regulations  go 


•See  section  94,  Insurance  I^aw  In  Appendix. 


Studies  in  Practical  Life  Insurance  79 

into  details  much  more  fully  than  it  is  possible  to  do  in  the  B^'-Laws.  They 
decide  many  questions  in  advance  as  to  the  general  policy  of  the  Company; 
assign  specific  duties  to  the  various  officers,  and  fix  the  limits  of  their  authority. 
The}'  are  particularly  full  and  specific  with  respect  to  who  may  incur  expense 
and  to  what  extent,  and  how  disbursements  shall  be  authorized  and  audited. 
These  Rules  and  Regulations  must  all  be  approved  by  the  Board  of  Trustees 
before  becoming  operative. 

These  committees  hold  regular  meetings— some  as  often  as  twice  a  week— keep 
careful  minutes,  and  report  to  the  Board  at  its  monthly  meetings.  Nothing  is 
done  without  the  autliority  of  some  committee,  or  of  the  Board,  and  such  authori- 
zation must  be  a  matter  of  record.  A  card  index  is  kept  of  committee  rulings  and 
decisions.  The  President  is  ex-officio  a  member  of  the  Board  and  of  all  committees. 

The  Home  Office  force  is  divided  into  Departments  and  Divisions  as  follows : 

Dcpartme H is.— Act\vAriefi\  Advertising,  Auditors',  Comptrollers',  Inspection, 
Law,  Medical,  Printing,  Real  Estate,  Supply,  Treasury. 

Divisio7is— Files  and  Records,  Indexes,  Inquiry,  Letter  '(incoming),  IMailing 
(outgoing),  Policy  Briefs,  Policy  Changes,  Policy  Claims,  Policy  Issues,  Policy 
Loans,  Policy  Loan  Securities,  Premium  Collection,  Stencil. 

Itinerary  of  an  Application  for  Insurance. 

As  we  began  these  "studies"  by  examining  actual  policies,  we  will  illustrate 
some  of  the  Company's  Home  Office  methods  by  folloAving  an  application  for 
insurance  through  the  various  departments  and  divisions  through  which  it  must 
pass  for  the  issue  of  a  policy.  On  the  morning  of  April  12  three  applications  were 
taken  from  the  mail  and  a  memorandum  attached  to  each  with  the  request  that 
each  person  who  did  anything  to  it  should  note  on  the  memorandum  what  he  did 
and  when ;  then  they  were  sent  on  the  regular  way  through  the  office.  Two  were 
declined ;  the  third  made  the  complete  journey  according  to  the  following  itiner- 
ary, beginning  with  the  day  the  application  was  signed : 

1.  Application  secured  in  Tennessee  April  8,  and  applicant  examined  by  a 
regular  examining  physician. 

2.  Nashville  Branch  Office  received  application  and  medical  examination 
April  10. 

3.  "Home  Office  Memorandum",  showing  name  of  Insured,  date  of  birth,, 
amount  of  insurance  applied  for  and  name  of  Beneficiary,  typewritten  and  at- 
tached. 

4.  An  inspection  memoi-anduin  sent  out  same  day  by  Nashville  Office  to  be 
reported  on  later. 

5.  Application  mailed  same  day  by  Nashville  Office  with  othei-  applications 
and  invoice  in  an  envelope  with  a  big  "A"  in  one  corner. 

6.  Envelope  arrived  in  New  York  Post  Office  April  12,  was  dropjied  in  the 
Company's  special  "A"  box,  and  brought  to  the  Home  Office  by  the  Company's 
carrier. 

7.  Envelope  received  by  Letter  Division  and  scut  unopened  to  Index 
Division. 

8.  Envelope  opened,  papers  stamped  "received  10.18  A.  ^I."     Application 


80  Studies  in  Practical  Life  Insurance 

compared  with  invoice  and  with  Home  Office  Memorandum  attached.  Search 
made  through  Index  containing  over  three  million  cards  with  name,  etc.,  of  all 
applications  ever  made  to  the  Company,  for  record  of  previous  insurance.  Name 
found. 

9.  At  10.38  ca.se  sent  to  Division  of  Policj^  Briefs,  where  among  1,750,000 
cards  the  record  of  a  former  insurance  was  found  and  note  made  of  same. 

10.  Application  sent  to  Medical  Department  at  10.50,  where  medical  ex- 
aminer's report  Avas  found  complete  and  his  signature  genuine. 

11.  The  case  then  went  to  the  Rating  Bureau  where  the  Company's  ratings 
as  to  family  history,  personal  record,  build,  residence  and  occupation  were 
applied  by  two  persons  independently  of  each  other. 

12.  At  1.45  P.  M.  it  came  before  the  Medical  Board.  The  ratings  were 
approved,  the  risk  recommended,  and  the  case  sent  by  pneumatic  tube  to  the 
Division  of  Policy  Issues. 

13.  At  2.10  P.  M.  it  Avas  given  to  the  clerk  who  handles  applications  from 
Tennessee.  The  widely  varying  laws  of  different  States  make  it  necessary  that 
each  case  be  handled  by  persons  familiar  with  the  special  requirements  of  the 
State  from  which  the  application  comes. 

14.  At  2.29  P.  M.  a  clerk  attached  a  slip  containing  the  premium  rate  and 
other  data,  and  the  checker  inspected  and  verified  the  figures. 

15.  At  2.40  P.  M.  the  case  reached  the  Logger's  desk  Avhere  it  was  logged 
and  numbered. 

16.  It  was  now  sent  to. the  Photo  Bureau.  The  laAvs  of  Tennessee  require 
that  a  copy  of  the  application  and  medical  examination  paper  shall  accompany 
each  life  policy  sold  in  that  State.  The  camera  is  quicker  and  more  accurate 
than  any  copyist :  it  makes  an  exact  copy  in  about  forty  seconds. 

17.  At  3.25  P.  M.  the  papers  were  given  to  the  Policy  Writer  Avho  finished 
his  work  in  just  fourteen  minutes,  and  the  checker  took  six  minutes  more  to 
examine  it  and  add  his  0.  K. 

18.  The  Policy  went  by  tube  to  the  Mailing  Division,  was  put  in  a  Nashville 
Branch  Office  envelope,  stamped  and  committed  to  the  care  of  Uncle  Sam. 

19.  AVhile  it  was  being  sent  out  several  persons  got  busy  completing  the 
records  of  the  Home  Office.  Cards  were  written  for  the  Index  Division,  the 
Division  of  Policy  Briefs,  the  Comptrollers'  Department,  the  Actuaries'  Depart- 
ment and  the  Agency  Department,  and  the  "President's  Welcome  Letter"  was 
filled  out  and  sent  to  the  new  member  of  the  New-York  Life  family.  An  entry 
C'f  the  Policy  was  made  on  the  ]\Iassachusetts  Insurance  Department  sheets,  which 
contain  a  record  of  each  Policy  issued  by  the  Company. 

20.  At  4  o'clock  the  application  and  accompanying  papers  Avent  to  the 
Inspection  Bureau,  Avhere  they  Avere  placed  in  the  uncompleted  file  to  await  the 
inspection  report,  asked  for  by  the  NashAnllc  Hi-niich  (Office  on  April  10. 

21.  On  April  14  the  in.speetion  report  Avas  received  at  Nashville,  found 
satisfactory  and  mailed  to  the  Home  Office,  Avhere  it  arriA-^ed  on  the  19th.  It 
Avas  then  attached  to  the  other  pajiers  Avliich  Avei-e  sent  to  th(>  File  Koom  to 
be  filed  as  No.  4,133,587. 

22.  The  daily  report  of  the  Nashville  Branch  (Office  for  April  30  to  the 
Comptrollers'  Department  reported  the  first  premium  paid  on  that  day. 


Stiidica  ill  rniclical  Life  Insurance  HI 

23.  The  different  departments  of  the  Home  Office  now  have  the  data  ol' 
this  Policy,  which  will  enter  into  the  accounts  of  new  insurance,  premiums 
received,  commissions  paid,  policy  reserve,  taxes  on  premiums,  insurance  in 
force  and  expected  mortality.  The  Comptrollers'  Office  will  see  that  the 
premium  reported  paid  is  accounted  for  in  the  bank  account  of  the  Nashville 
Brauch,  that  the  proper  commission  is  paid  the  agent,  the  proper  fee  paid  the 
:\Iedical  Examiner,  the  tax  on  the  premium  paid  the  State,  of  Tennessee, 
and  that  the  proper  renewal  receipt  is  sent  to  Nashville  before  the  next  pre- 
mium falls  due.  Everything  that  happens  to  the  Policy  hereafter  will  be 
noted  upon  one  or  more  of  the  cards  in  the  Home  Office,  so  that  they  will 
supply  a  complete  history  of  the  insurance  as  long  as  it  remains  in  force.  The 
Policy  is  now  subject  to  all  the  contingencies  noted  in  our  examination  of  the 
sample  policies,  and  this  may  be  the  Policy  that— with  its  supplemental  annuity 
■contract— is  to  remain  in  force  one  hundred  years. 

AVe  saw  in  the  first  chapter  of  these  studies  the  principles  upon  which  the 
Company's  contracts  are  based;  here  we  see  how  they  are  put  in  force.  It  is 
from  contracts  for  insurances  and  annuities  that  the  Company  derives  primarily 
its  entire  income.  The  accumulations  made  necessary  by  the  Policies  soon  become 
a  secondary  source  of  income.  In  order  that  we  may  follow  out  General  Gar- 
field's plan  of  finding  out 

How  THE  INIONEY   CoMES   In, 

Let  us  begin  at  these  sources  of  income,  follow  up  the  golden  stream  and  see  what 
becomes  of  it. 

First  let  us  see  how  the  Company  makes  sure  that  it  gets  all  that  belongs  to 
it.  We  have  seen  that  when  a  Policy  is  written,  various  cards  are  written  to  keep 
a  record  of  it  in  the  Home  Office.  The  most  important  of  these  cards  are  (1)  the 
Comptrollers'  Premium  Card,  (2)  the  Policy  Brief  Card,  and  (3)  the  Actuaries' 
Valuation  Card.  When  a  Policy  is  issued  and  sent  to  the  proper  Branch  Office 
the  Comptrollers'  Premium  Card  contains  a  charge  of  indebtedness  due  the 
Company;  it  is  the  duty  of  the  Comptrollers  to  see  that  such  indebtedness  is 
accounted  for— either  by  payment  of  the  premium  or  by  the  return  of  the  Policy. 
The  cards  are  filed  according  to  Branch  Offices  and  in  numerical  order.  As 
successive  rencAval  premiums  become  due  the  renewal  receipts,  together  with  the 
notices  to  be  sent  to  the  insured,  are  made  up  in  the  Comptrollers'  Office  and 
shipped  to  the  Branch  Offices  for  collection,  a  mark  being  made  on  the  cards 
indicating  that  receipts  have  been  sent.  These  renewal  receipts  now  become 
charges  of  indebtedness  which  must  be  accounted  for— either  by  payment  of  pre- 
miums or  the  return  of  the  receipts. 

Whatever  is  necessary  to  show  the  standing  of  the  Policy  as  an  obligation  of 
the  Company  is  noted  on  the  Actuaries'  card.  When  the  Policy  is  put  in  force  by 
payment  of  the  first  premium  the  Actuaries'  Card  representing  the  Policy  is  put 
in  the  ''paid- for"  drawer,  and  it  stays  there  until  some  change  takes  place  in  its 
status.  The  total  of  these  cards  therefore  shows  the  total  amount  of  insurance  in 
force.  They  are  assorted  according  to  date  of  issue,  plan  and  age,  which  makes 
what  is  called  the  "valuation  order".     This  enables  the  Department  to  make  a 


82  Studies  in  Practical  Life  Insurance 

valuation  of  Policy  liabilities  by  the  group  method.  Thus  the  Comptrollers  see 
to  it  that  the  Company  gets  its  due,  the  Actuaries  make  a  corresponding  note  of 
the  obligation  thereby  created,  while  the  Brief  Card  contains  other  items  of 
information  respecting  the  Policy. 

About  one-fifth  of  the  income  of  the  Company  consists  of  interest  and  rents 
When  the  Finance  Committee  authorizes  the  purchase  of  a  bond  or  the  loaning 
of  money  on  mortgage,  the  Comptrollers'  Department  makes  a  transcript  of  the 
minutes  containing  the  authorization.  Every  month  the  Department  compares 
this  record  with  the  Treasurer's  check-book  and  with  the  canceled  checks  and 
compares  the  price  paid  with  the  authorized  price.  Then  a  card  is  written  de- 
scribing the  security  and  noting  what  interest  will  be  due  and  when.  These  cards 
contain  charges  of  indebtedness  for  the  amounts  of  interest  due  and  are  used  in 
checking  the  accounts  of  the  Treasurer.  Similar  cards  for  real  estate  loans  are 
used  in  the  Real  Estate  Department,  and  cards  of  bonds  are  used  in  the  Treasury 
Department.  For  read}'  reference  lists  of  securities  are  made  on  sheets  and 
checked  with  the  cards.  Receipts  from  interest  are  entered  upon  these  cards 
and  lists  and  checked  by  the  Comptrollers'  Department.  The  account  is  made 
up  monthly  showing  the  amount  received  and  the  amount  due  and  unpaid.  The 
amounts  paid  are  checked  up  on  the  books  of  the  Treasury  Department.  In- 
terest on  Policy  and  Premium  Loans  of  every  kind,  including  that  paid  when 
days  of  grace  in  the  payment  of  premium  are  availed  of,  and  interest  on  agents' 
debts,  are  all  verified  by  the  Comptrollers'  Department, — to  insure  the  collec- 
tion of  all  interest  due  the  Company. 

Having  thus  seen  how  the  money  comes  in  and  how  it  goes  out  for  invest- 
ment, we  will  now  ascertain  how  it  goes  out  in  payments  to  policy-holders  and 
for  expenses.  We  will  first  follow  a  claim  for  death-loss  through  the  office  under 
the  care  of  the  Division  of  Policy  Claims. 

Itinerary  of  a  Death-Claim. 

1.  Insured  died  June  3,  1911,  at  Shreveport,  La. 

2.  Shreveport  Branch  Office  notified  of  the  death  on  June  6,  and  delivered 
the  necessary  blanks  for  making  proof  of  death  and  claim  and  sent  a  report  of 
the  death  to  the  Home  Office. 

3.  Report  of  death  received  at  the  Home  Office  June  9,  and  sent  to' Policy 
Claims  Division.  Policy  Index  Division  was  then  asked  for  a  list  of  all  policy 
numbers  issued  on  the  life  of  the  deceased,  and  when  furnished  a  messenger  was 
sent  to  the  Policy  Briefs  Division  for  a  blueprint  photograph  of  the  Company's 
records.  When  this  blue  print  was  furnished  it  was  carried  by  the  same  messen- 
ger to  the  Comptrollers'  Department  to  have  the  date  to  which  premiums  were 
paid  endorsed  on  same  and  the  amount  of  notes,  if  any,  recorded, — then  to  the 
Policy  Loan  Division  for  any  record  of  loans  which  might  be  charged  against 
the  IVilicy.  The  Idue  pi-int  was  then  taken  to  the  Actuaries'  Department  who 
compared  the  records  of  the  Brief  Division  with  their  records  and  completed  a 
card  for  the  Auditors'  Department,  showing  the  exact  amount  payable  under  the 
Policy.  At  the  same  time  a  re(|uest  was  sent  to  tlie  File  Division  for  the  ai)pliea- 
tion  and  all  previous  correspondence. 


Studies  in  Practical  Life  Insurance  83 

4.  When  this  application  and  correspondence,  together  with  the  blue  print 
of  the  records  and  list  of  Policies  were  received,  the  correspondence  was  put  in 
chronolojiical  order  and  placed  in  a  death-loss  envelope. 

5.  The  case  was  assigned  a  loss  number,  and  recorded  in  the  Death-Loss 
Book,  showing-  the  amount  of  the  Company's  liability  under  the  Policy.  A  record 
<3ard  was  completed  with  all  data  so  far  as  obtained,  and  Index  Cards  were 
made  that  will  enable  the  Division  to  locate  the  case  should  future  correspondence 
be  received  without  the  number  of  the  Policy  being  given.  The  case  itself  was 
placed  in  a  file,  pending  receipt  of  proofs  of  death. 

6.  Proofs  of  death  received  on  June  12  and  checked  up  by  two  competent 
•clerks;  evidence  of  death  being  satisfactory  and  the  claim  being  in  order,  they 
signed  the  same  and  referred  it  to  a  member  of  the  Sub-Loss  Committee  for  final 
action. 

7.  Case  approved  for  payment  by  member  of  the  Sub-Loss  Committee  on 
June  12  and  warrant  for  check  signed  and  forwarded  to  the  Auditors'  Depart- 
ment. Auditors'  Department  reviewed  the  warrant,  comparing  the  figures  with 
tho.'i:e  furnished  by  the  Actuaries'  Department  and  sent  it  to  the  Division  of 
Policy  Payments  for  check. 

8.  Check  being  furnished,  it  was  forwarded  to  the  Shreveport  Branch  Office 
on  June  12  with  instructions  to  deliver  the  same  to  the  Beneficiary  upon  obtain- 
ing the  Policy  and  the  signature  of  Beneficiary  to  death-claim  receipt. 

9.  Check  delivered  to  widow  of  Insured  June  17.* 

Payment  of  Endowments  and  Annuities. 

Endowments  and  Annuities  fall  due  upon  fixed  dates  and  can  therefore  be 
arranged  for  in  advance.    The  methods  pursued  in  these  cases  are  as  follows: 

Endowments.  — JLnr\y  in  the  sunmier  of  each  year  the  Actuaries'  Department 
furnishes  the  Policy  Claims  Division  a  list  of  all  the  Endowment  Policies  matur- 
ing in  the  following  year.  This  Division  obtains  from  the  Division  of  Policy 
Briefs  photographic  records  of  each  of  these  Policies,  verifies  the  date  of  settle- 
ment, prepares  a  card  with  a  description  of  the  Policy  and  a  statement  of  the 
amount  payable  at  maturity.  The  item  is  then  entered  in  the  Endowment 
Register  under  the  date  of  maturity.  The  tabs  on  the  record  cards  are  trimmed 
to  indicate  the  date  of  maturity— the  tab  remaining  indicating  the  mijnth— and 
the  cards  are  placed  on  file  in  chronological  order  in  the  cabinet  and  an  entry 
made  in  a  Diary  under  the  date  upon  which  the  check  should  be  sent  to  the 
Branch  Office. 

Upon  the  date  indicated  in  the  Diary  for  issuing  the  check  the  Division  com- 

*  This  case  was  selected  to  show  the  method  of  paying  a  death-loss,  but  incidentally  it 
shows  something  else  that  will  be  of  interest.  The  Policy  was  issued  April  24,  1894,  for  |3,000. 
and  contained  a  clause  promising  that  in  case  death  occurred  prior  to  April  24,  1914.  the  Com- 
pany would  pay,  in  addition  to  the  face  of  the  Policy,  an  amount  equal  to  one-half  the  amount 
of  premiums  paid,  taken  at  the  tabular  annual  rate.  The  Policy  was  charged  with  a  loan  of 
$603,  and  with  balance  of  year's  premium  (semi-annual)  $36.48,  a  total  of  $639.48.  It  was 
credited  with  premium  additions  of  $680.40  and  interest  paid  on  loan  in  advance  $26.02,  a  total 
of  $706.42.  So  the  premium  was  paid,  the  loan  canceled,  and  $3,066.94  net  went  to  the  widow's 
bank  account,  for  which  a  very  grateful  letter  was  sent  to  the  Company.  Incidentally  it  was 
said  that  while  his  investments  in  other  lines  had  been  considerable,  his  life  insurance  formed 
the  major  part  of  his  estate  at  death.  This  was  one  of  the  forms  of  Policy  which  was  abolished 
toy  the  Armstrong  Laws  of  1906. 


84  Studies  in  Practical  Life  Insurance 

pares  the  photographic  brief  with  the  Register  Card  in  the  Division  of  Policy 
Briefs,  notes  thereon  any  change  that  may  have  occurred  since  the  photograph  of 
the  record  was  made,  and  certifies  to  present  conditions.  The  briefs  are  then  sub- 
mitted to  the  Comptrollers'  Department  for  a  statement  of  the  date  to  which 
premiums  have  been  paid,  and  to  the  Loan  and  Note  Divisions  for  certification 
as  to  any  indebtedness  that  may  be  charged  against  the  Policies.  The  application 
is  withdrawn  from  the  Filing  Division,  the  record  of  the  title  of  the  Policy  is 
examined  and  the  payee  of  the  Endowment  Benefit  is  entered  on  the  Policy 
Claims  settlement  card.  The  card  and  file  are  then  reviewed  by  the  Chief  Clerk 
of  the  Sub-Division.  The  warrant  clerk  of  the  Statistical  and  Accounting 
Division  prepares  the  warrant.  In  writing  this  warrant  triplicate  copies  are 
made  automatically— the  duplicate  becomes  a  letter  of  transmittal  to  the  Branch 
Office  and  the  triplicate  is  attached  to  the  file.  After  the  papers  have  been 
examined  and  the  warrant  signed  by  the  Superintendent  of  the  Division,  it  goes 
to  the  Auditors'  Department  for  his  verification  and  approval,  upon  which  the 
Division  of  Policy  Payments  draws  a  check  in  payment,  w'hich  is  duly  for- 
warded to  the  Branch  Office  with  proper  instructions  as  to  its  delivery. 

A7iniiities.~V^hene\er  an  Annuity  Policy  is  issued  to  a  person  residing 
outside  the  territory  under  the  jurisdiction  of  the  Paris  Office  a  record  card  and 
file  are  furnished  the  Policy  Claims  Division.  The  Annuity  is  then  indexed,  and 
the  tabs  of  the  card  trimmed  to  indicate  the  dates  on  which  the  payments  will 
fall  due;  the  card  is  then  placed  in  the  Division  cabinets,  where  all  such  cards 
are  arranged  in  the  order  in  which  payments  fall  due. 

All  annuity  payments  in  the  United  States,  Canada  and  Mexico  are  made 
by  checks  issued  from  the  Home  Office  upon  the  warrant  of  the  Superintendent 
of  the  Policy  Claims  Division  duly  approved  by  the  Auditors'  Department. 
These  checks  are  dated  to  correspond  to  the  date  upon  which  the  annuity  falls 
due,  and  are  mailed  from  the  Home  Office  direct  to  the  annuitant  sufficiently  in 
advance  of  the  due  date  to  insure  delivery  on  that  date  or  immediately  there- 
after. They  are  so  restricted  as  to  endorsement  that  they  can  be  collected  only 
by  the  annuitant,  and  are  so  worded  that  they  become  a  receipt  for  the  annuity 
instalment ;  the  bank  being  responsible  for  the  endorsements,  the  checks  serve  the 
double  purpose  of  a  certificate  of  survival  and  a  receipt,  and  no  other  voucher  is 
required.  Each  month  an  examination  is  made  to  ascertain  if  any  of  these 
voucher-checks  have  not  been  returned,  and  if  so  for  what  cause.  Annuitants 
are  required  to  keep  the  Company  advised  of  any  change  of  address,  and  when 
they  remove  temporarily  or  permanently  beyond  the  territory  served  by  the 
Home  Office  check  system,  the  Policy  Claims  Division  gives  necessary  instruc- 
tions to  the  Company's  foreign  offices  to  secure  the  prompt  payment  of  the 
instalments  as  they  fall  due.  Payments  made  at  other  offices  are  reported  in 
account  with  proper  vouchers,  and  these  vouchers  are  approved  by  the  Policy 
Claims  Division  before  the  charges  in  the  account  are  allowed. 

All  other  payments  to  Beneficiaries  are  made  through  the  Policy  Claims 
Division,  the  warrants  being  prepared  and  audited  in  a  similar  manner.  This 
Division  also  prepares  and  furnishes  all  statistical  infoi-iiiation  in  regard  to 
the  Company's  Policy  Claim  Disbur.sements  and  Liabilities  that  may  ho  required 
by  Governmeuts  oi-  any  other  purpose. 


Studies  in  Practical  Life  Insurance  85 

Other  Disbursements. 

We  will  now  examine  the  method  of  regulating'  other  disbursements  of  the 
Company. 

Under  the  Company's  By-Laws  and  the  direction  of  the  Auditing  Committee, 
the  Comptrollers  of  the  Company  are  charged  with  the  duty  of  examining,  verify- 
ing and  checking  all  receipts  and  disbursements.  All  disbursements  made  directly 
from  the  Home  Office,  except  those  on  account  of  investments,  Policy  con- 
tracts and  Home  Office  salaries,  are  made  upon  warrants  drawn  upon  the  Treas- 
urer by  a  Comptroller,  pursuant  to  an  authorization  therefor,  which  authoriza- 
tion must  be  filed  in  writing  in  the  Comptrollers'  Department.  All  disburse- 
ments, no  matter  by  whom  Avarranted,  which  appear  in  the  Cash  Book,  are 
checked  daily  by  this  Department  and  the  warrants  examined.  Disbursements 
on  account  of  Policy  contracts  are  made— as  we  have  seen— upon  warrants  signed 
by  the  Superintendent  of  Policy  Claims  (claims  for  death-losses  being  approved 
by  another  member  of  the  Loss  Committee)  and  verified  by  the  Auditors'  Depart- 
ment. The  record  of  these  disbursements  comes  to  the  Comptrollers'  Department 
for  final  verification.  Disbursements  for  Home  Office  salaries  are  made  upon  the 
joint  warrant  of  the  Comptrollers'  Department  and  the  Secretary,  who  is  in  charge 
of  the  clerical  force.  All  salaries  must  be  authorized  by  the  Office  Committee 
and  the  authorization  filed  with  the  Comptrollers'  Department.  In  short,  all  dis- 
bursements must  first  be  authorized  in  a  general  way  by  some  Committee,  and 
some  one  deputed  to  sign  the  warrant  for  each  payment  or  class  of  payments. 
Records  of  the  disbursements  with  vouchers  form  the  basis  of  frequent  reports, 
all  of  which  are  verified  by  the  Comptrollers'  Department.  The  Auditing  Com- 
mittee also  employs  an  expert  accountant  who  makes  an  independent  audit  anrl 
reports  directly  to  the  Auditing  Committee. 

Each  Branch  Office  in  the  United  States,  Canada  and  ]Mexico  makes  a  daily 
report  of  its  receipts  and  disbursements  to  the  Comptrollers'  Department.  The 
reports  from  foreign  departments  outside  the  European  Department,  are  received 
as  the  foreign  mails  arrive.  Premiums  and  commissions  in  the  reports  are 
checked  to  see  that  proper  authority  exists,  and  at  the  end  of  every  month  the 
reports  are  summarized  for  the  bookkeeper  and  distributed  by  him  to  the  proper 
accounts  in  the  general  books  of  the  Company. 


These  statements  and  illustrations  of  Home  Office  organization  and  methods 
indicate  (1)  the  complete  oversight  maintained  by  the  Trustees  of  the  Company; 
(2)  the  thorough  organization  of  the  Home  Office  force,  each  Department  and 
Division  having  its  own  proper  work  and  each  supplementing  and  acting  as  a 
check  upon  the  work  of  others.  The  methods  embody  the  ideas  of  the  most 
skilled  organizers  and  the  most  complete  appliances  in  use  in  the  business  world. 
The  system  by  which  the  business  is  done  is  made  as  perfect  as  possible,  and  then, 
in  order  to  provide  for  exceptional  cases  and  add  human  judgment  to  the 
machine,  a  "Division  of  Inquiry"  takes  up  such  cases  and  looks  after  delays  of 
every  sort. 


CHAPTER  VI. 

rEUSOXAL  AM)  Tl  BLIC   ASPECTS  OF  LIFE 
INSURANCE. 


Extracts  from  Addri^sses  by  DAKWIN  P.  KINGSLEY,  President 
New-York  Life  Insurance  Company. 


A  Few  of  the  Things  That  Life  Insurance  Does. 

From  an  Address  before  the  Finance  Forum,  West  Side  Y.  M.  C.  A.,  New  York,  April  19,  1911. 

1st.— It  answers  the  question  whether  or  not  a  man  will  live  long  enough 
to  provide  for  his  family.  To  the  extent  that  money  can  represent  a  man's 
productive  powder  it  doesn't  matter  when  the  properly  insured  man  dies. 

2d. — It  cultivates  aggressively  the  principles  of  self-respect  and  individual 
responsibility,  which  are  the  very  essence  of  our  civilization. 

3d. — It  prevents  the  social  defaults  which  premature  death  otherwise 
brings — defaults  which  are  quite  as  disastrous  to  society  and  frequently  as 
dishonorable  as  those  which  occur  in  banking  and  general  business. 

4th.— It  meets,  as  nothing  else  does  or  can,  the  demands  for  capital  of  a 
society  rapidly  developing  and  offering  the  faith  and  earning  power  of  unborn 
generations  as  security  for  money  which  must  be  spent  now. 

5th. — It  is  a  banker  for  millions  of  people — a  banker  who  cannot  be 
ruined  through  panic,  but  w^ho  allows  every  depositor  to  draw  on  him  at  any 
time  to  the  extent  of  his  cash  credit. 

6th. — It  joins  business  to  a  constructive  sociology;  it  puts  the  man  of  small 
means  into  touch  with  a  statesmanlike  plan ;  it  enters  the  realms  of  imagination 
and  takes  us  at  least  to  the  threshold  of  a  new  social  order. 

The  Ultimate  Meaning  of  liiFE  Insurance. 

From  an  "Address  on  Life  Insurance  in  its  Relations  to  Sociology",  delivered  before  a  class  at 
Yale  University,  February  5,  1908. 

It  is  time  now  to  take  cognizance  of  the  ultimate  meaning  of  Life  Insur- 
ance. "We  do  not  reach  science",  says  Dr.  Small,*  "until  we  advance  from 
knowledge  of  what  has  occurred  to  knowledge  of  the  meaning  of  what  has 
occurred".  Let  us  examine  Life  Insurance  a  little  more  closely  while  it  is 
performing  its  function  in  society  in  order  to  ascertain  the  meaning  of  what 
occurs. 

•A.  W.   Small.  D.   D.,   head  of  the  Sociological   Department,  Chicago  University. 


Studies  in  Practical  Life  hisurance  87 

(1)  Take  a  group  of  men  aged  twenty-one.  When  they  insure  their  lives 
what  does  it  mean  to  them?  It  means  that  they  have  initiated  a  new  social 
process  by  which  they  will  be  able  to  pay  their  debts,  by  which  the  probability 
that  they  or  any  member  of  their  families  will  ever  be  added  to  the  dependent 
group  in  society  is  greatly  decreased. 

Sociology  shows  that  for  everything  which  distinguishes  the  i)resent  state 
of  society  from  barbarism  we  are  indebted  to  the  past.  Every  man  is  a  debtor 
according  as  he  has  received,  and  the  young  man  who  has  been  nurtured  and 
educated  by  the  social  processes  of  the  present  generation  owes  a  great  debt. 
It  will  take  time  to  pay  it,  and  time  is  the  one  thing  he  is  not  sure  of.  He  may 
die  to-morrow.  Life  Insurance  shows  him  that  a  certain  proportion  of  the  men 
of  his  age  will  die  during  the  coming  year,  and  that  other  numbers  will  die 
during  each  ensuing  year  until  all  are  dead.  It  shows  that,  while  some  will 
not  live  a  year  longer,  others  will  live  over  seventy  years  longer,  and  that  the 
average  number  of  years  which  all  will  live  after  age  twenty-one  is  over  forty. 
The  man  who  dies  young,  cannot  possibly  pay  his  debt  by  ordinary  methods, 
but  Life  Insurance  is  a  process  in  which  the  man  aged  twenty-one  is  dealt 
with  on  the  assumption  that  he  will  live  forty  years  longer.  By  a  small  sum 
which  he  has  already  earned,  and  other  equal  sums  which  he  may  earn  in  each 
year  as  long  as  he  lives,  he  provides  for  the  j^ayment  of  his  debt,  w^hether  he 
dies  soon  or  lives  long. 

This  means  to  him  an  increasing  sense  of  self-respect  and  of  freedom.  He 
has  made  provision  from  his  own  resources  for  paying  his  debt ;  and  he  now 
plans  and  works,  not  in  the  shadow  of  a  doom  that  may  interrupt  his  plans 
and  cut  short  his  work,  but  with  the  assurance  that  his  plans  may  be  carried 
out  and  his  work  completed,  in  a  measure,  no  matter  when  death  may  intervene. 
This  danger  to  his  life  plans,  which  was  before  vague  and  uncertain  but  abso- 
lutely fatal  when  it  came,  has  now  been  definitely  located,  measured  and  pro- 
vided for.  He  may  now  plan  and  work  on  the  assumption  that  he  has  forty  yeai-s 
of  life  before  him.  He  has  capitalized  his  youth,  his  health,  his  education  and 
his  skill  in  a  form  that  enables  him  to  pay  his  debt,  but  not  in  a  form  that 
enables  him  to  spend  it  or  lose  it.  On  the  other  hand  he  is  now  at  liberty  to  use 
more  freely  in  other  ways  the  capital  he  accumulates  by  other  methods,  because 
he  has  provided  for  the  future  of  his  family. 

If  it  be  said  that  Life  Insurance  does  not  directly  create  material  values, 
but  is  only  a  method  of  distribution;  the  sociological  answer  is  that  distribu- 
tion is  necessary  in  order  that  other  social  processes  may  go  on.  The  grain 
raised  on  a  Western  prairie  would  have  little  value  if  it  could  not  be  so  dis- 
tributed as  to  be  available  for  those  who  need  it.  It  is  worth  more  in  Chicago 
than  where  it  grew,  more  in  New  York  than  in  Chicago,  more  in  Liverpool 
than  in  New  York.  Our  whole  transportation  plant,  which  earns  more  than 
almost  any  other  single  industrial  plant  in  the  country,  is  based  upon  the 
principle  that  distribution  adds  to  value.  A  human  life  strictly  by  itself  may 
have  little  value.  As  a  part  of  the  social  unit  which  we  call  the  family  it  has  more 
value.  As  a  part  of  the  civil  organization  which  we  call  the  State,  it  has  a 
still  higher  value— higher  chiefly  because  it  is  now  in  combination  with  others. 
As  a  member  of  an  organization  which  may  comprehend  millions  of  similar 


88  Studies  in  Practical  Life  Insurance 

units,  based  on  an  immediate  capitalization  of  the  value  of  every  unit,  in  other 
words,  as  a  factor  in  the  co-operation  and  distribution  which  Life  Insurance 
inaugurates,  the  individual  life  finds  its  highest  sociological  usefulness. 

Life  Insurance  not  only  increases  wealth  by  distributing  it — it  transforms 
material  wealth  into  social  wealth.  ]\Iouey  is  of  value  only  for  Avhat  it  will 
bu}',  and  the  wise  man  is  continually  exchanging  it  for  something  better.  Life 
Insurance  transforms  money  into  comfort,  self-respect,  education,  character. 
From  a  sociological  standpoint  processes  are  valuable  according  as  they  create 
conditions  and  sentiments  favorable  to  still  better  processes.  The  co-operation 
of  patriotism  creates  conditions,  but  it  adds  no  new  element  to  human  associa- 
tion and  it  ultimately  depends  upon  force  and  violence.  In  the  co-operation 
of  industrialism  the  utilization  of  new  materials  and  new  processes  is  a  most 
important  sociological  feature,  but  new  processes  and  new  machinery  render 
the  old  useless  and  create  new  conflicts,  so  that  the  net  gain  to  society  is 
thereby  diminished.  Life  Insurance  introduces  a  new  element  into  co-operation— 
the  continuity  of  the  race — and  upon  this  basis  it  erects  a  social  structure 
that  destroys  no  pre-existing  values,  creates  no  new  conflicts,  and  depends  in 
its  operation  upon  moral  and  social  forces.  It  seeks  what  the  sociologist  seeks 
—the  betterment  of  society,  that  is,  the  society  of  the  future.  It  makes  its 
appeal  to  the  profoundest  instincts  of  manhood,  and  those  who  answer  the 
appeal  are  so  quickened  in  their  moral  nature  that  they  are  better  prepared 
for  their  other  work  as  social  units.  Patriotism, — admirable  as  it  is, — tends 
to  separate  men  of  different  nationalities,  to  make  them  contingent  enemies; 
industrialism, — necessary  as  it  is, — introduces  a  competition  that  is  akin  to  war, 
and  its  progress  is  attended  with  conflict  and  waste.  Life  Insurance  draws 
men  together  as  moral  and  social  forces  whose  highest  interests  lie  in  the 
future  and  in  their  children. 

(2)  What  does  Life  Insurance  mean  with  respect  to  those  for  wliosc  benefit 
men  insure?  So  long  as  the  head  of  the  family  lives,  all  the  members  share 
with  him  to  some  extent  in  the  improved  status  which  Life  Insurance  gives  to 
the  family  as  a  whole.  If  he  dies  prematurely^,  Life  Insurance  prevents  the 
pathological  condition  into  which  his  family  W'Ould  otherwise  fall.  They  are 
not  placed  in  abnormal  relations  to  the  social  organism,  but  are  enabled  to 
continue  the  status  quo.  Their  development  will  proceed  in  an  orderly  manner, 
without  any  violent  change  of  relations  in  their  environment.  In  this  environ- 
ment a  sudden  change,  either  from  affluence  to  poverty  or  from  poverty  to 
affluence,  is  not  in  accord  with  the  most  helpful  social  process  and  is  in  either 
case  usually  a  misfortune.  Life  Insurance  rates  a  man  at  what  he  is  worth,  not 
by  any  arbitrary  standard,  but  b}'  what  he  is,  physically  and  economically,  and 
at  his  death  it  passes  this  value  on  to  his  family. 

Again,  Life  Insurance  fulfils  for  the  family  the  law  of  the  family,  the 
first  law  of  Sociology',  that  members  are  to  be  treated  according  to  their  needs, 
and  not  according  to  their  capacities.  It  makes  provision  for  that  education 
and  culture  of  children  which  the  father  would  make  if  he  lived.  Society 
at  large,  seeing  the  necessity  of  education,  creates  and  maintains  at  great 
expense  an  educational  structure,  in  order  that  all  cliildrcn  may  receive  some 


Studies  ill  Practical  Life  Insurance  89 

degree  of  the  training  necessary  for  their  eflieieney  as  units  in  the  social 
organism. 

"The  primary  symptom  of  failing  health  in  a  body  politic"  is  declared 
by  the  sociologist  to  be  "lack  of  opportunity — opportunity  primarily  industrial, 
then  opportunity  of  every  sort  in  which  the  interests  of  the  individual  are 
capable  of  being  effective".  Obviously,  the  opportunity  of  an  education  is 
lacking  to  the  child  who  is  kept  from  school  to  add  to  the  income  of  the  family 
by  its  labor. 

(3)  What  does  Life  Insurance  mean  to  society  at  large?  As  society  is 
made  up  of  units,  it  follows  that  the  well-being  of  the  organism  will  be  promoted 
by  anything  that  benefits  the  individual  units.  If  Life  Insurance  enables  men 
to  pay  their  debts  and  to  work  according  to  larger  plans;  if  it  creates  a  new 
social  process  that  avoids  conflict  and  waste;  if  it  adds  to  material  wealth  by 
scientific  distribution  and  to  social  wealth  by  its  wise  response  to  social  needs ; 
if  it  enables  the  family  to  develop  along  normal  lines,  without  any  of  those 
violent  wrenches  which  tend  to  throw  the  social  organism  out  of  gear;  then  it 
supplies  the  conditions  and  forces  for  a  normal  and  healthy  development  of 
society  itself.  Society  always  has  on  its  hands  certain  classes  of  dependents 
for  whom  it  must  provide, — one  of  its  most  difficult  problems.  It  grapples  with 
such  problems  with  clumsy  hands.  They  belong  to  the  family  and  can  properly 
be  solved  nowhere  else.  Life  Insurance  tends  to  prevent  any  further  increase 
of  this  class,  and  by  increasing  the  number  and  maintaining  the  efficiency  of 
the  better  class,  it  strengthens  the  hands  of  society  for  the  work  it  must  do. 
It  increases  also  the  number  of  those  who,  having  provided  for  the  sustentation 
of  life,  are  able  to  give  time  and  strength  to  the  augmentation  of  life — to  its 
enrichment  by  culture  and  the  arts,  and  to  the  development  of  better  structures 
in  the  social  organism.  It  is  thus  in  harmony  with  the  final  purpose  of  the 
social  process  which  is  declared  to  be  "the  incessant  evolution  of  persons 
through  the  evolution  of  institutions,  which  evolve  completer  persons,  who 
evolve  completer  institutions,  and  so  on  beyond  any  limit  we  can  fix". 


A  New  Declaration  of  Independence. 

From  an  Address  before  the  Eastern  $100,000  Club,  Old  Point,  Va.,  Oct.  8,  1902. 

Our  profession  contemplates  duty  rather  than  rights.  It  teaches,  in  effect, 
that  natural  rights  cease  with  years  of  discretion;  they  pass  away  with  the 
advent  of  manhood.  In  some  form  or  other,  for  every  man,  life  becomes  a  con- 
flict as  soon  as  the  period  of  responsibility  is  reached.  If  a  man  lives,  he  must 
fight.  If  he  enjoys  any  measure  of  freedom,  he  must  fight.  If  he  achieves  any 
happiness,  worthy  the  name,  he  must  fight.  To  the  adult,  therefore,  the  Declara- 
tion of  Independence  should  be  superseded  by  a  declaration  of  duties.  AYe  hold 
that  a  man  is  born  to  responsibilities;  endowed  with  certain  inalienable  duties, 
amongst  which  are  laboi-,  that  he  may  earn  the  right  to  live,  and  co-operation 
that  he  may  give  as  much  as  he  gets  and  be  happy  because  he  has,  of  himself  and 
unaided,  made  provision  to  meet  every  liability.        ****** 

Life  insurance  is  the  doctrine  of  dut5^  It  is  the  highest  civic  code  yet  prac- 
ticed by  man.     It  is  not  philanthr()i)y,  which  does  about  as  much  harm  as  good; 


90  Studies  in  Practical  Life  Insurance 

it  is  not  the  hysteria  which  too  often  characterizes  benevolent  and  religious  work ; 
it  is  not  the  selfishness  of  the  Declaration  of  Independence :  it  is  the  new  doctrine 
of  duty,  the  true  democracy.  It  asks  no  favors,  avoids  no  obligations,  seeks  no 
forgiveness  for  debts.  It  exacts  its  just  dues,  demands  its  full  rights,  enforces 
its  equitable  claims.  It  bullies  no  one,  and  cringes  to  no  one.  It  is  rapidly  dissi- 
pating what  little  body  ever  existed  in  the  fiction  of  kingly  prerogative,  and  it 
promises  to  eliminate  purgatory  from  the  territory  of  the  hereafter,  since  it 
compels  its  followers  to  pay  their  debts  either  before  or  at  death. 

It  is  a  declaration  of  duty  which  shall  result  in  the  commonwealth  of  man ; 
where  the  will  of  the  worker  will  be  supreme ;  where  the  toiler  shall  abundantly 
receive  his  daily  bread ;  where  all  men  will  pay  their  debts,  and  ask  forgiveness 
for  no  just  dues ;  where  temptation  to  injure  others  or  degrade  ourselves  will  be 
overcome. 

This  commonwealth  will  come  because,  amongst  other  things,  we  are  slowly 
evolving  and  establishing  this  better  declaration  and  higher  doctrine  of  human 
rights. 

We  have  established  the  fact  that  human  life  is  valuable;  valuable,  not  in 
the  instinctive  fashion  which  governs  the  law  of  self-preservation ;  valuable,  not 
from  a  sentimental  standpoint,  but  valuable  from  the  material  standpoint ;  valu- 
able as  an  asset  in  the  great  conflict  into  which  every  man  must  enter  as  soon  as 
he  reaches  the  age  of  responsibility. 

We  are  advancing  even  beyond  that,  and  establishing  a  further  fact,— that 
life  is  not  an  individual  fight  alone,  although  it  is  that;  not  something  subject 
to  the  hazards  of  our  daily  contests,  although  it  is  that,  too;  not  a  matter  of 
accident  or  chance,  but  that  it  is,  or  may  be,  like  a  great,  almost  tideless  sea, 
reaching  so  far  behind  us  and  so  far  before,  that  no  man  can  see  its  boundarie.5. 

How  to  transmute  life  into  a  material  asset  is  our  business :  how  to  shift  life 
from  a  character  otherwise  fleeting,  temporary,  unstable,  into  a  condition  almost 
immutable  and  having  the  strength  of  the  hills  and  the  reach  of  the  sea  — is  our 
mission. 

LiP^E  Insurance  and  the  Man. 

From  an  Address  before  a  Conference  of  the  Principal  Fieldmen  of  the  New-York  Life  In- 
surance Company,  at  the  Mount  Washington  Hotel,  Bretton  Woods,  N.  H..  Thursday. 
September  29,    1910. 

In  what  respect  is  the  work  of  life  insurance  unique?  What  is  the  finest 
thing  it  does?  Not  what  is  its  greatest  achievement,  measured  as  we  measure 
the  achievements  of  other  forces  in  society,  but  what  particularly  unique  and 
fine  thing  distinguishes  it  1  In  what  important  field  is  it  first,  indeed  almost  alone  1 

We  dwell  on  the  wonderful  service  it  is  rendering— especially  in  the  great 
companies— through  the  necessary  and  large  accumulation  of  securities.  This 
service  was  little  thought  of  a  few  years  ago.  Now  all  the  world  Avonders  at  it, 
and  all  the  politicians  try  to  make  it  pay  tribute.  But  in  this  service  life  insur- 
ance is  not  unique.  Other  great  sections  of  organized  society  do  the  same  work. 
The  savings  b;mks  do  it,  the  trust  companies  do  it,  although  neither  holds  securi- 
ties for  such  a  high  service  or  so  completely  divorced  from  all  the  influences 
which  at  times  dislocate  organized  effort  and  bring  ruin  through  violent  fluctna- 


Studies  in  Practical  Life  Insurance  %  91 

ticns.  AVe  cannot,  therefore,  call  this  the  unique,  the  finest  product  of  life 
insurance. 

We  also  dwell,  and  naturally  so,  on  the  beneficence  which  is  jjriniarily  the 
reason  for  the  existence  of  all  life  insurance.  And  they  present  a  wonderful 
picture,— those  millions  sent  daily  almost  with  the  speed  of  light  just  where  they 
will  do  the  most  good.  A  policy  maturing  in  Alaska  is  worth  just  as  much  as  it 
would  be  if  it  had  matured  in  New  York,  and  the  beneficiaries  receive  its  pro- 
ceeds almost  as  quickly.  *  *  *  Here,  again,  life  insurance  is  far  in  advance 
of  any  other  system  of  beneficence  known  to  society.  But  while  it  is  more  efficient 
than  other  projects,  more  immediate  in  its  action,  more  substantial  in  its  sources 
(if  responsibility  and  power,  it  is  not  in  this  respect  unicjue.  Everywhere  there 
are  great  foundations  doing  similar  work.  There  are  hospitals,  orphanages  and 
homes  for  the  aged  and  indigent  with  millions  behind  them  dedicated  solely  to 
a  beneficence  which  is  fine  but  which  not  infrequently  runs  into  charity.  No, 
even  this  beneficence,  which  is  naturally  considered  by  many  people  to  be  the 
beginning  and  the  end  of  life  insurance,  is  not  its  unique,  not  its  finest  work. 

*  *  *  If  neither  the  direct  benefactions  of  life  insurance  nor  its  service 
to  the  industrial  and  commercial  world  as  a  buyer  of  securities  constitute  its 
unique,  its  finest  service;  in  what  does  this  service  consist?  Mind,  I  do  not  say  its 
greatest  service.    I  purposely  use  the  words  ''unique"  and  "finest".     *     *     ♦ 

One  of  the  noticeable  contrasts  between  Europe  and  America  is  the  larger 
number  of  insured  and  the  larger  amount  of  life  insurance  per  capita  in  private 
corporations  in  America  ?    AVhy  is  this  ?    There  must  be  a  reason  for  it.     *     *     * 

There  is  a  natural,  a  necessary,  a  mutually  creative  relation  between  the 
(levelopmoiit  of  life  insurance  in  the  United  States  and  the  peculiar  character 
of  the  citizenship  of  the  United  States;  each  explains  the  other.  American  citi- 
zenship was  the  virgin  soil;  the  life  insurance  idea  was  the  vivifying,  fructifying 
sun.  The  product,  American  Life  Insurance,  towers  above  other  beneficent 
and  business  structures  as  the  sequoias  of  California  tower  above  the  great  pines 
which  surround  them.  In  its  result  it  surpasses  other  plans  because  it  has 
reached  in  the  individual  w^hat  other  plans  have  not  reached,  because  it  alone 
has  cultivated  and  satisfied  that  sense  of  personal  obligation  to  general  society 
which  rests  upon  every  member  of  every  American  community.  Whatever  else 
they  may  do.  whatever  else  they  may  be,  our  great  life  companies  are  conclusive 
proof  that  a  keen  sense  of  civic  duty  pervades  the  entire  people. 

Consider  some  of  the  facts  which  distinguish  our  citizenship  from  the  citizen- 
ship of  any  other  land :  Here  no  man  may  be  troubled  because  of  his  religious 
convictions.  Do  you  realize  that  this  is  true  in  no  other  important  country  on 
earth?  It  has  not  been  true  here  very  long,  but  it  is  true  now.  The  certain  knowl- 
edge that  we  may  not  be  harassed  or  oppressed  over  what  we  believe  or  do  not 
believe  about  any  of  the  great  so-called  fundamentals  of  religious  faith  makes 
us  all  stand  a  little  straighter.  It  cost  nuich  to  accomplish  that.  But  church 
and  state  are  forever  separated  here,  really  separated.  That  is  not  true  of  any 
other  considerable  nation.  Such  a  condition  seems  perfectly  natural  to  us,  but 
it  was  not  so  natural  to  our  forefathers.  Only  yesterday,  or  at  most  a  few 
generations  ago,  they  were  hanging  Quakers  and  jailing  Baptists. 

American  life  insurance  could  never  have  attained  its  gigantic  proportions 


92  Studies  in  Practical  Life  Insurance 

except  for  the  complete  separation  of  church  and  state,  except  for  the  regenera- 
tion of  society  which  that  condition  has  brought  about.  It  could  never  have 
become  what  it  is  while  some  overlord  was  responsible  for  men's  convictions,— so 
long  as  men  did  not  directly  and  individually  grapple  with  all  the  problems  of 
life  and  of  death,  too.  It  could  never  have  become  what  it  is  unless  the  souls  of 
men  had  been  awake,  or  unless  it  had  been  able  to  awaken  them.  With  civil 
and  religious  liberty  came  the  demand  for  a  new  man,  or,  perhaps  it  would  be 
better  to  say,  came  the  opportunity  for  a  new  man.  The  calamity  unspeakable 
would  have  been  the  failure  of  the  new  man  to  appear  under  the  in- 
spiration of  such  conditions.  If  selfishness  and  not  responsibility,  if  license 
and  not  liberty  had  taken  control,  our  last  condition  would  have  been 
worse  than  our  first.  All  that  might  have  happened.  Many  prophesied 
that  it  would  happen.  Some  critics  claim  that  it  has  happened;  but  we  know 
better.  We  Imow  that  more  and  more  our  people  love  justice  and  fair  play,  more 
and  more  they  hate  graft  and  special  privilege,  more  and  more  they  value  the 
right  of  franchise.  Steadily  they  are  rising  to  the  high  demands  which  govern- 
ment by  the  people  makes  upon  its  citizenship.         ****** 

About  two  and  a  half  generations  ago,  when  as  a  Nation  we  had  passed 
beyond  our  period  of  organization,  had  purchased  Louisiana,  fought  the  War  of 
1812,  acquired  the  Oregon  country,  Texas,  and  the  territory  which  includes  Cali- 
fornia, we  were  ready  for  our  real  advance.  Just  then  life  insurance  began  its 
active  propagandism.  As  a  clean-cut  fact,  what  was  its  plea?  It  went  to  a  man 
personalh-  and  said  to  him,  first  of  all,  "You  are  a  man;  you  are  valuable  be- 
cause you  have  responsibilities,  high  responsibilities  to  your  family,  to  yourself 
and  to  the  State.  You  cannot  avoid  those  responsibilities  and  be  a  good  citizen. 
Xo  me  else  can  discharge  your  duties  for  you.  You  can  discharge  them  and  you 
must".  It  appealed  to  manhood.  Its  voice  cut  through  the  fogs  of  prejudice, 
the  clouds  of  superstition,  and  the  mysteries  always  assiduously  cultivated  by 
every  type  of  ruler.  It  was  many-voiced  and  many-tongued.  It  sent  out  thou- 
sands of  missionaries  preaching  the  new  gospel.  These  preachers  could  not  talk 
to  their  text,  they  could  not  succeed,  if  they  Meandered  from  the  doctrine  of  man's 
individual  responsibility.  They  preached  no  hatred  of  other  men;  they  held  up 
no  terror  of  authority;  they  offered  no  menace;  they  appealed  to  no  impulse  of 
greed.  They  didn't  talk  systems  of  government  or  religion.  They  struck  straight 
for  the  greatest  thing  in  the  world— a  man's  self-respect.  They  reached  it,  and 
when  we  understand  that  fact,  wonder  ceases  over  their  mighty  success.  When 
they  reached  self-respect  they  quickened  the  man.  When  there  was  in  the  man 
only  a  spark,  they  fanned  the  spark  into  a  flame.  When  that  flame  burst  forth 
the  man  was  transformed.  Away  went  inherited  fears,  away  went  the  hesitancy 
and  lack  of  decision  and  weakness  born  of  dead  generations  and  dying  systems. 
Forth  stepped  not  merely  an  insurant,  but  a  man  of  a  new  type— armed  as  no 
other  citizen  of  any  other  country  was  ever  armed. 

,  AVliat  otiier  l)usiness  or  pi'ofession  has  for  three-quarters  of  a  century  driven 
lionie.  singly,  an  idea  so  vital  to  the  .sound  development  of  the  nation?  Other 
forces  have  worked,  it  is  true,  but  none  so  uniquely,  and  none  lias  s1uc]<  so  close 
to  the  real  point.  Religion  worked  mightily.  l)nt  coupled  with  its  exhortations 
were  necessarily  tin-  (Icinands  of  that  authoi'itx-  which  is  insci)ai-Mble  from  cvci'v 


studies  in  'Viactical  Life  Insurance  93 

form  of  dogmatic  theology.  Politics  worked,  but  generally  for  an  appropriation 
first.  Life  insurance  alone  called  directly  to  the  man,  to  that  divine  something 
in  him  which  has  been  struggling  upward  for  thousands  of  years.  Every  policy 
placed  made  a  better  citizen ;  every  premium  paid  was  a  guarantee  of  the  perpe- 
tuity of  the  Constitution. 

Now  all  the  world  begins  to  see  the  power  and  the  prophecy  which  inhere  in 
the  citizenship  of  the  United  States.  There  was  never  a  citizenship  like  it.  That 
is  a  matter  of  history,  a  matter  of  fact.  We  believe  that  it  is  fairly  conscious  of 
its  might,  that  it  is  fearless  and  yet  fair.  We  know  that  it  responds  ultimately  to 
every  worthy  appeal.  We  know  that  it  is  grim  in  its  hatred  of  oppression.  We 
are  certain  that  in  the  end  it  will— as  it  always  has— cast  out  false  leaders. 

If  you  analyze  this  citizenship  seeking  to  know  its  dynamics,  seeking  to 
understand  why  it  hates  oppression  and  wants  the  square  deal,  why,  largely 
from  a  moral  impulse,  it  once  sent  a  million  men  into  battle,  why  it  lately  won 
freedom  for  a  fair  island  and  then  renounced  dominion  over  it,  if  you  pull  it  to 
pieces  to  learn  in  what  consists  that  moral  and  spiritual  power  which  still  makes 
the  United  States  the  land  of  hope  for  the  plain  people  of  all  lands, — if  you  do 
this,  you  come  in  the  last  analysis  to  individual  self-respect,  the  nerve  centre  of 
civil  and  religious  liberty.  At  the  same  time  you  find  yourself  at  the  very 
sources  of  life  insurance ;  you  have  reached  its  origin  and  you  understand  its 

American  life  insurance  has  fostered  and  encouraged  the  religion  of  self- 
respect.  It  has  been  militant  in  its  methods.  It  has  been  as  fierce  as  the  Cru- 
saders in  its  attacks.  In  its  ministrations  to  the  needs  of  the  weak  and  the 
defenseless  it  has  been  as  gentle  and  as  blessed  as  the  dews  of  heaven.  Its  creed, 
your  creed,  was  phrased  by  Emerson,  who  was  a  prophet,  in  these  words: 

"We  will  work  with  our  own  hands, 
we  will  walk  on  our  own  feet, 
we  will  speak  our  own  minds." 

When  the  upright  man,  standing  upright,  was  needed,  we  called  to  him,  called 
on  his  soul,  and  all  that  was  within  him,  and  he  responded,  "Here  am  I.'"  In 
this  respect  the  work  of  life  insurance  is  unique.    This  is  the  finest  thing  it  does. 


Life  Insurance— the  Discoverer  and  the  Lawgiver. 

From  an  Address  to  the  Inspectors,  Agency  Directors  and  Leading  Fieldmen  of  the  New-York 
Life  Insurance  Company,  Augusta,  Ga.,  January  19,   1911. 

The  greatest  discovery  made  since  man  began  to  hunt  for  truth  is  man's 
discovery  of  himself.  The  greatest  organized  institution,  helping  to  expand 
and  extend  that  discovery  and  to  establish  it  as  a  practical  fact,  is  life  insur- 
ance. A  famous  novelist  once  wrote  a  book  around  the  idea  of  how  not  to  do  it. 
One  of  the  puzzles  in  history — when  it  is  reviewed  in  a  large  way — is  how 
it  happened  that  man  was  so  long  in  beginning  to  discover  himself.  He  looked 
for  relief  everywhere  but  in  the  right  place.  He  could  understand  no  help  that 
was  not  external  and  mysterious.    If  he  was  ill,  he  wanted  a  miracle  performed; 


94  Studies  in  Practical  Life  Insurance 

if  he  was  hungry,  he  tried  to  steal  his  food  from  somebody"  else ;  if  he  was 
numerically  weak,  he  bowed  the  knee  and  bent  his  neck  under  the  dominance 
of  some  body  or  some  thing  which  he  thought  could  bring  him  protection  and 
safety.  He  was  especially  afraid  of  death,  because  life  had  no  meaning.  So  all 
kinds  of  institutions  grew  up,  mostly  based  on  the  doctrine  that  man  himself 
here  and  now  was  a  worm  of  the  dust,  full  of  iniquity  and  of  no  account ;  possess- 
ing the  possibilities  of  great  things,  good  and  ill,  in  an  indefinite  new  world,  if  only 
he  would  act  on  the  theory  that  he  was  of  no  consequence  here  and  accept  the 
doctrine  that  somebody  else  possessed  all  the  sec^rets  of  this  life  and  of  the  life 
to  come.    He  was  everlastingly  looking  for  external  authority.       *       *       *       * 

All  these  things  have  arisen  from  the  fact  that  man  has  not  been  looking  in 
the  right  place  for  relief.  It  is  possibly,  even  probably,  true  that  until  relatively 
recent  times  he  had  not  developed  to  the  point  where  he  could  take  any  other 
view.  It  is  equally  and  undeniably  true  that  ambition  and  the  love  of  power 
created  leaders  who  deliberately  developed  the  wrong  point  of  view  and  kept 
men  from  looking  in  the  right  direction,  kept  them  from  making  the  great  dis- 
covery,—that  the  greatest  thing  in  the  world  is  man  himself;  that  the  most 
valuable  thing  in  the  world  is  man  himself;  that  the  most  powerful  thing  in  the 
world  is  man  himself;  that  the  divine  thing  which  gives  the  world  and  the  uni- 
verse a  meaning  is  again  man  himself.         ****#** 

The  discovery  of  the  law  of  life  insurance  was  not  the  only  thing  that  made 
man  discover  himself,  but  it  is  one  of  the  greatest  things,  and  the  practical 
application  of  the  law  is  the  greatest  force  in  bringing  man  to  understand  him- 
self and  his  own  supreme  importance.     ******** 

When  men  discovered  that  there  was  a  law  of  death  they  inevitably  dis- 
covered the  law  of  life.  This  was  a  real  revelation.  Every  sound  law  is.  when 
discovered,  a  revelation— if  there  is  a  general  intelligence  to  comprehend  it  and 
a  conscience  to  use  it.  The  law  of  life  insurance  helped  man  to  discover  himself 
because  it  taught  him  that,  through  it,  he  could  not  only  banish  the  terrors  of 
life's  uncertainty,  but  by  its  principle  of  co-operation  he  could  of  himself  and  by 
himself  create  a  power  that  could  do  without  waste  what  governments  taxed  him 
unmercifully  to  do  and  then  failed  to  do.  It  suggested  a  new  patriotism,  because 
it  taught  him  that  there  was  no  reason  why  he  should  slaughter  his  fellmvs  in 
order  to  make  his  home  safe.         *******=** 

Perhaps  the  most  striking  peculiarity  of  the  law  of  mortality  is  the  fact  that 
it  reveals  nothing  concerning  the  individual  when  alone.  It  cannot  be  selfishly 
applied.  Men  had  always  been  seeking  some  hint  or  prophecy  of  how  long  they 
would  live— how  long  the  individual  would  live.  They  studied  the  stars 
above;  they  called  spirits  from  the  vasty  deep.  The  answers  that  came 
from  without  invariably  brought  degradation  and  reaction.  The  correct 
answer  finally  came  from  within— from  man  himself.  The  form  in  which 
it  came  indicated  the  use  that  could  be  made  of  it  —  it  must  be 
used  co-operatively,  unselfishly.  It  established  a  new  bond  of  kinship.  Here 
was  a  physical  law  of  which  every  man  was  seen  to  be  a  part,  a  law  that  called 
for  neither  King  nor  Bishop.  It  gave  a  new  meaning  to  the  declaration  that 
"no  man  liveth  to  himself  and  no  man  dieth  to  himself".  If  there  is  to  be 
co-operation  there  must  be  peace,  fairness,  confidence,  kindness,  justice,  responsi- 


studies  in  Practiciil  Life  Insurance  95 

bility,  faith,  efficiency,  and  the  law  which  underlies  each  of  these  great  rules  of 
conduct  life  insurance  teaches  constantly. 

As  soon  as  the  law  of  mortality  was'  applied  by  life  insurance  it  became  a 
discoverer  in  the  moral  realm  also— a  discoverer  "of  the  thoughts  and  intents 
of  the  heart"— the  very  work  which  the  Apostle  attributes  to  the  word  of  God. 
Life  insurance  discovers  the  man  who  needs  it  and  makes  its  appeal,  not  to  any 
outward  authority,  but  to  the  moral  law  written  in  the  heart.  It  thus  becomes 
the  moral  law  giver.  It  says  "you  ought".  There  is  no  voice  of  authority 
higher  than  that.  "Am  I  my  brother's  keeper?"  Not  in  the  sense  that  I  must 
impose  my  belief  and  practice  upon  him  and  persecute  him  if  he  does  not  agree 
with  me.  Am  I  the  keeper  of  those  whose  support  I  have  undertaken?  Most 
assuredly  — to  the  utmost  extent  of  my  ability.  That  is  the  answer  of  every 
manly  man— of  every  honest  heart.  But  before  the  discovery  of  the  law  of 
HKirtality  and  its  application  by  life  insurance,  a  man's  power  to  support  his 
family  was  limited  by  the  length  of  his  life.  If  life  was  prematurely  cut  off, 
we  placed  the  blame  for  failure  to  support  the  family  upon  Providence  or  fate. 
Life  insurance  has  brought  the  responsibility  back  to  the  man's  own  door.  He 
can,  therefore  he  ought.  Since  life  insurance  has  become  the  moral  lawgiver, 
Providence  has  become  less  inscrutable;  fate  has  become  more  kindly.     *     *     * 

Civillaws  are  as  various  as  nationalities.  Life  insurance  laws  are  the  same 
everywhere.  Civil  laws  halt  at  the  frontier.  Beyond  that  there  is  the  fiction 
called  international  law.  International  law  in  its  last  analysis  is  still  based  on 
the  doctrine  that  might  is  always  right.  To  bring  its  children  into  harmony 
from  world's  end  to  world's  end  life  insurance  needs  no  courts  of  arbitration, 
no  Hague  Tribunals.  And  why?  Because  it  has  discovered  that  men  are  essen- 
tially the  same  everywhere;  because  it  has  discovered  that  international  hatreds 
are  the  product  of  false  theories;  because,  naturally  and  not  by  grace,  men  trust 
each  other.  Having  made  these  discoveries,  it  became  the  lawgiver,  civil  and 
moral. 

Its  first  law  is  co-operation,  its  second  law  is  justice,  its  third  law  is  self- 
respect,  and  then  comes  in  the  law  of  "you  ought"  following  hard  on  the  heels 
of  "you  can".  This  lifts  man's  eyes  to  the  contemplation  of  his  own  majesty, 
his  own  responsibility,  his  own  power. 

By  its  discoveries  and  by  its  laAvs  life  insurance  changes  man  from  the 
creature  to  the  master,  from  a  means  to  an  end,  from  a  mob  to  a  solid  phalanx. 
It  banishes  the  otherwise  constant  and  demoralizing  fear  of  death  and  sets  men 
to  living 

"As   if  this  flesh  which   walls   our  life   about  were 
brass  impregnable." 


Life  Insurance— Its  Service  and  Leadership. 

From  the  New  York  Independent,  Nov.   22,  1900. 

Life  insurance,  as  it  first  took  form,  was  a  prophecy  of  the  day  when  man's 
outlook  would  be  as  wide  as  the  world :  it  was  the  expression  of  an  idea  that  was 
peaceable,  unselfish  and  wise,  yet  having  withal  a  militant  side.     Under  certain 


96  Studies  in  Practical  Life  Insurance 

great  leaders  this  beneficent  idea  not  only  prophesied,  but  fought.  It  preached 
the  doctrine  of  human  fraternity,  and  at  the  same  time  vigorously  attacked  the 
prejudices,  the  vices  and  the  provincialisms  that  scatter  and  embitter  men  and 
retard  progress.  With  the  beginning  of  the  twentieth  century  the  period  of 
prophecy  draws  to  a  close,  and  the  militant  period,  the  time  of  command  and 
leadership,  begins.  *********** 

Life  insurance  is  about  to  pass  out  of  that  portion  of  its  history  in  which 
it  has  struggled  and  pleaded.  It  has  been  pleading  for  an  unwelcome  doctrine; 
the  doctrine  that,  in  spite  of  race  and  religious  hatreds,  in  spite  of  color,  climate 
or  the  ambition  of  so-called  statesmen,  man  has  no  natural  reason  to  hate  his 
fellow-man ;  on  the  contrary,  he  has  a  community  of  interest  with  all  other  men. 
This  doctrine  has  not  been  welcome  to  the  vicious,  to  the  intemperate,  to  the 
improvident.  It  has  not  been  too  welcome  to  those  who  try,  by  appeals  to 
national  pride,  to  fan  the  flame  of  hate  against  other  men  called  "foreigners". 

Life  insurance  in  its  period  of  pleading  has  had  enemies  within,  too,  as  well 
as  foes  without.  The  force  of  its  doctrine  has  not  infrequently  been  weakened 
by  the  action  of  those  of  its  own  household— men  who  professed  its  faith,  but 
understood  not  its  doctrine ;  men  who  failed  utterly  to  comprehend  its  scope ; 
men  who  desired  a  "little"  world  and  small  things;  men  who  have  carped  at 
and  criticised  those  who  believed  in  a  broader  theory.  So-called  servants  of  our 
faith  have  foretold  disaster  to  those  who  undertook  to  preach  the  Gospel  of 
universal  prudence;  they  have  even  appealed  to  the  prejudices  that  tend  to  make 
all  men  reactionaries.  But  against  foes  within  and  enemies  without,  life  insur- 
ance has  been  spreading  over  the  earth  like  the  coming  of  the  light  of  a  new 
day.  It  has  gathered  its  armies  from  beyond  every  sea,  but  chiefly  from  wher- 
ever the  Anglo-Saxon  dwells.  Life  insurance  to-day  is  the  very  spirit  of  the 
Anglo-Saxon  race :  its  methods  are  masterful ;  it  seeks  to  meet  and  mingle  with 
all  men ;  it  learns  and  it  teaches ;  but  chiefly,  it  has  an  ideal,  for  which  it  strenu- 
ously labors. 

Like  the  Anglo-Saxon  race,  life  insurance  has  not  waited  for  the  times  to 
come  right :  it  has  forced  the  hand  of  Time ;  it  has  called  into  use  the  best  organ- 
izing ability,  the  broadest  courage,  the  best  business  methods ;  it  has  grown  more 
and  more  insistent,  more  and  more  militant,  more  and  more  dominant,  more  and 
more  successful  and  useful.  It  has  taught  men  how  to  link  together  not  only 
the  strength  of  individuals,  but  the  immeasurable  strength  of  generations,  and 
in  preaching  that  gospel  it  has  come  in  itself  to  illustrate  the  power  which  it 
taught  men  to  use.  The  very  law  which  made  men  better  when  they  insured  their 
lives  has  made  life  insurance  mighty  with  the  lapse  of  years.  We  have  heretofore 
thought  almost  exclusively  of  its  moral  and  beneficent  side;  hereafter  we  shall 
think  more  of  what  we  may  call  its  physical  side,  of  the  enormous  force  which 
it  will  be  compelled  (whether  it  would  or  not)  hereafter  to  exercise  in  the  affairs 
of  men. 

It  has  come  to  be  an  axiom  in  war  that  tlic  nation  wins  which  has  the  longest 
purse.  No  group  of  men  on  earth  to-day,  organized  for  an  industrial  purpose, 
or  organized  for  a  civic  purpose,  has  behind  it,  dedicated  to  a  single  use.  such 
vast  accumulations  of  wealth  as  have  they  who  make  up  the  army  of  the  insured. 


studies  in  Practical  Life  Insurance  97 

TIk'  must  impressive  thing  iu  the  world  at  the  dawn  of  the  twentit'tli  euutury 
of  Christian  civilization,  is  the  vast  strength  of  the  forces  that  are  ready  to  make 
its  history.  In  no  previous  century  of  this  era,  or  of  any  era,  has  there  been 
such  organized  power,  such  command  over  the  forces  of  nature,  such  centraliza- 
tion of  men.  Among  all  the  forces  that  will  enter  into  the  contests  of  this  new 
and  great  arena,  there  is  no  moral  force  to  compare  with  life  insurance;  and 
from  a  physical  standpoint,  which  of  all  the  giants  of  the  new  century  will  daiv 
to  measure  strength  with  this  Hercules? 

The  power  of  life  insurance,  both  morally  and  physically,  is  unlike  tli<' 
power  of  any  other  institution  ever  erected  by  mortal  hands.  No  progressivr 
condition  can  menace  it;  no  advance  in  humanity  can  bring  about  its  destruction. 
In  the  coming  century  there  wnll  be  fighting  on  many  fields ;  there  will  be  a  vast 
sacrifice  of  human  life,  an  untold  waste  of  human  effort.  Civic  organizations 
that  in  other  days  led  the  world  to  a  higher  level  will  in  turn  be  crushed  and 
destroyed,  because  new  forces  and  new  and  better  men  demand  a  better  State 
and  better  governments.  Religions  will  clash,  and  the  old  war  between  science  and 
revealed  truth  will  go  merrily  on. 

Without  destroying  any  good  thing  now  existing,  without  halting  or  imped- 
ing the  advancement  of  any  new  truth,  without  waste,  life  insurance  will  go  on. 
Onl}'^  degeneration  in  the  moral  fiber  of  the  world  can  shrink  its  beneficence  and 
paralyze  its  aggressive  strength.      ********* 

Life  insurance  is  a  strong  city  and  a  sword  of  fire.  It  holds  in  a  vast  citadel 
of  conservatism  the  ambitions  and  the  hopes  that  run  through  the  notes  of  every 
wedding-march,  that  cluster  about  every  cradle.  It  has,  too,  in  its  treasure-house 
securely  locked  the  commercial  faith  of  men,  of  cities,  of  States,  and  of  nations. 

Its  doctrine  compelled  it  to  preach  and  prophesy  in  the  nineteenth  eentui-y; 
its  power  and  place  will  compel  it  to  lead  in  the  twentieth  century. 


Taxation  of  Life  Insurance. 


From  an  Address  delivered  before  the  18th  Session  of  the  Trans-Mississippi  Congress,  at  :Mu3- 
kogee,  Oklalioma,  November  20,  1907. 

************* 

In  substantially  every  organized  form  of  society  that  has  ever  existed  there 
has  been  a  recognition  of  the  fact  that  it  was  good  public  policy  to  encourage 
the  growth  of  certain  ideas  and  interests,  whether  all  individual  citizens  were 
directly  benefited  by  such  growth  or  not.  For  example,  when  Colorado  became 
a  State,  provision  was  inserted  in  the  Constitution  exempting  mining  property 
from  all  taxation  for  a  period  of  ten  years.  This,  of  course,  put  all  the  burden 
of  taxation  on  other  forms  of  property,  but  it  was  the  judgment  of  the  men  who 
framed  the  Constitution  and  of  the  people  who  adopted  it  that  the  added  burden 
was  warranted  because  of  the  encouragement  which  would  thereby  be  given  io 
mining  enterprises  and  the  ultimate  benefit  which  would  accrue  to  all  forms  of 
property  in  the  State.  The  same  idea  on  a  much  larger  scale  is  represented  in 
the  exemption  of  church  and  school  property  from  taxation.  It  is  stated  on  good 
.authority  that  the  value  of  property  owned  to-day  in  the  Ignited  States  l)y  the 


98  Studies  in  Practical  Life  Insurance 

various  churches  is  five  thousand  million  dollars,  and  none  of  it  is  taxed.  It  is 
not  taxed  because  the  controlling  opinion  has  been  that  the  Church  was  a  benefit 
to  the  State,  that  its  influence  upon  the  Avhole  was  of  value  to  every  citizen,  that 
its  work  ought  to  be  encouraged,  and  that  the  burden  of  taxation  ought  to  be 
placed  on  other  forms  of  property.  The  same  argument  has  been  used  with 
regard  to  school  property. 

Of  course,  in  exempting  church  property  from  taxation,  every  tax-payer, 
believer  and  unbeliever,  is  taxed  to  make  up  for  the  exemption.  If  property 
owned  by  the  Church  pays  no  tax,  then  other  property  pays  more  tax.  So  the 
State  in  eflt'ect  has  said  that  the  unbeliever  should  be  indirectly  taxed  for  the 
support  of  the  Church  because  the  Church  is  a  pubic  benefit. 

Every  one  of  these  arguments  applies  with  almost  equal  force  to  the  pre- 
miums of  life  insurance.  We  have  now  reached  a  period  where  it  is  difficult  to 
find  a  man  who  will  claim  that  life  insurance  is  not  a  public  benefit.  Substan- 
tially every  citizen  recognizes  the  conservative  value  of  life  insurance;  not  alone 
in  the  burdens  of  which  it  relieves  the  State ;  not  alone  in  its  fight  against  want 
and  poverty ;  not  alone  in  the  protection  which  it  affords  the  defenceless— the 
opportunities  which  it  gives  boys  and  girls  where  otherwise  there  would  be  no 
opportunity— but  in  the  part  it  plays  in  the  industrial  development  of  the  coun- 
try,—in  the  demand  Avhich  it  creates  for  good  securities;  in  the  conservative 
position  which  it  takes  with  regard  to  securities ;  in  the  great  centres  of  financial 
conservatism  and  strength  which  it  necessarily  creates.  And  yet,  while  life 
insurance  plays  all  these  important  functions  in  society,  it  has  been  taxed  and 
is  still  taxed  as  though  it  were  in  some  fashion  a  public  menace,  or,  if  not  that, 
at  least  a  strictly  private  enterprise  in  Avhich  the  State  had  no  direct  interest, 
and  indeed  an  enterprise  of  which  the  State  in  its  necessity  may  take  advantage. 
^  Under  the  system  of  taxation  adopted  by  the  various  States  in  this  country, 
/in  one  form  or  another  every  dollar  of  premiums  paid  by  the  policy-holder  is 
'  taxed.  These  taxes  range  from  a  fraction  of  one  per  cent,  in  one  or  two  States 
up  to  more  than  three  and  one-half  per  cent,  in  one  State. 

The  premiums  which  the  insured  pay  are  in  themselves  a  tax,  self-imposed. 
The  great  body  of  them  represent  serious  economies,  and  even  sacrifices,  on  the 
part  of  the  policy-holders.  They  represent  savings  Avhich  more  directly  benefit 
the  State  than  any  other  form  of  investment,  and  yet  while  the  State  exempts 
school  property  and  church  property,  it  t_axes  the  premiums  of  life  insurance. 
A  parallel  argument  may  be  made  with  respect  to  the  exemption  from  taxation 
of  savings  bank  deposits.  The  man  who  puts  his  money  at  interest  in  a  savings 
bank  is  not  taxed;  the  man  who  puts  his  money  into  life  insurance  is  taxed. 
There  is  a  monstrous  inconsistency  in  this  situation  somewhere. 

There  has,  beyond  any  question,  been  a  decided  advance  of  late  in  tlie  caiii- 
l)fiign  against  special  privilege  and  special  advantage,  as  against  the  general 
public.  Railroad  passes  have  been  abolished,  and  everybody  applauds  the  action. 
There  are  other  special  privileges  and  advantages  which  ought  to  be  abolished, 
and  they  will  be.  But  my  argument  goes  to  this  conclusion :  that  if  as  a  matter 
of  public  policy  it  is  just  and  wise  to  exempt  school  property  and  church  prop- 
erty and  some  other  forms  of  property  from  taxation,  then  the  premiums  of  life 
insurance  ought  to  enjoy  the  same  exemption.         ****** 


Studies  in  Practical  Life  Insurance  99 

The  Kingdom  and  the  Riches  of  Life  Insurance. 

From  a  Paper  read  before  the  Annual  Convention  of  the  Southern  and  South-eastern   $100,000 
Clubs  of  the  New-York  Life  Insurance  Company,  Tampa  Bay,  Florida,  March  13,  1901. 

There  is  current  everywhere — and  especially  in  this  country — an  uneasy 
feeling  with  regard  to  what  we  call  wealth;  a  feeling  that,  at  times,  approaches 
actual  hostility.  This  feeling  is  directed  generally  against  a  few  men  who  have 
so  much  of  the  world's  goods,  that  we  call  them  rich;  or  against  those  great 
modern  engines  of  co-operation  called  corporations.  But  men,  as  such,  and 
corporations,  as  such,  are  relatively  of  little  consequence ;  and,  while  this  feel- 
ing of  unrest  and  hostility  find  a  tangible  object  of  attack  in  such  men,  and 
in  corporations,  its  true  significance  must  be  sought  in  a  wider  field,  and  its 
menaces,  if  any  exist,  are  not  simply  against  men,  or  corporations,  but  against 
society  at  large.  *********** 

It  lias  become  the  fashion  now-a-days  to  dwell  on  the  riches  of  the  world. 
We  have  lately  been  greatly  impressed  because  the  entire  civilized  world  has 
been  insisting  that  the  United  States — both  actually  and  potentially — is  a  fabu- 
lously wealthy  Nation. 

As  a  matter  of  fact,  the  world  has  always  been  poor;  and  is  poor  to-day. 
The  gaunt  figure  of  Hunger  stalks  only  a  little  w^ay  in  the  rear  of  every  man, 
and  all  nations.  The  Histoiy  of  Civilization  is  the  story  of  an  interminable 
Avar  with  Hunger.  Every  instant  of  time  that  separates  the  cradle  from  the 
grave  is  made  up  of  conflict  with  a  tireless,  insistent  enemy :  and  that  enemy 
is  Hunger.  ********'**** 

The  great  contest  of  all  life  has  been  for  mere  existence ;  for  something 
to  eat.  It  is  just  as  truly  the  condition  of  the  world  to-day.  as  it  was  a  hundred 
thousand  years  ago.  England,  for  example,  is  supposed  to  have  a  food  supply 
for  two  weeks,  if  all  external  sources  of  supply  were  suddenly  to  fail.  If  the 
woild  were  really  rich,  the  spectre  of  Hunger  might  ])e  removed  to  some  dis- 
tance ;  it  can  never  be  banished.  The  world's  problem,  therefore,  broadly  stated, 
has  always  been,  How  to  become  really  rich !  How  to  accumulate  something 
from  which  to  satisfy  for  more  than  a  day  that  dire  necessity  which  stands 
always  at  hand  demanding  an  unending  dole! 

The  first  step  in  the  solution  of  the  problem  was,  and  is.  the  PJiysical  Con- 
quest of  the  Earth.    The  second  step  is  Co-operation  betiveen  Men. 

The  Physical  Conquest  of  the  Earth  began  as  soon  as  animal  life  appeared 
Tipon  its  surface.  *  *  *  ^lan  began  the  contest  with  his  brain,  his 
hands  and  his  senses  only.  With  these  he  fought  his  fellows,  and  beasts  only 
a  little  wilder  than  himself.  He  tore  at  the  surface  of  the  earth  with  such  rude 
implements  as  necessity  most  quickly  suggested.  He  hid  in  holes  and  caves, 
when  an  ungenerous  earth  pinched  him  with  cold  or  blistered  him  with  heat. 
Necessity,  and  something  iuternal^ — something  that  has  lighted  the  torch  of 
Hope,  and  has  always  whispered  of  what  we  call  Immortality— drove  him  on; 
ever  on.  He  not  only  fought  Nature,  but  he  watched  Nature,  and  learned 
some  of  her  secrets.  He  grew  cunning,  and  turned  these  secrets  to  account. 
He  used  the  winds,  the  tides,  the  rain,  the  seasons.  As  he  watched  and  listened 
^nd  fought,  he  gradually  came  to  loam  some  of  the  deeper  secrets  of  Nature. 
He  developed  chemistry  and  mechanics:  and,  little  by  little  advanced— always 


100  Studies  in  Practical  Life  Insurance 

with  great  suffering  and  Joss — until  to-day  he  has,  in  some  senses,  not  only  the 
earth,  but  the  solar  sj'stem  in  his  grasp,  or,  if  not  in  his  grasp,  at  least  spread 
out  before  him  in  such  a  way  that  further  discoveries  are  certain,  and  other 
secrets  must  be  learned.         ********** 

The  conquest  of  Nature  has  been  long  and  painful,  not  only  because  the 
problems  were  intricate  and  the  contest  unequal,  but  because  man  has  never 
been  able  fully  to  undci-stand  himself  and  his  fellows.  When  men  met  other 
men,  there  seemed  always  to  he  the  same  hostility  that  Nature  has  fixed  between 
men  and  beasts.  Even  as  they  fell  upon  the  beasts  of  the  forest,  so  men  fell 
upcn  each  other.  All  jnen  had  common  enemies,  all  men  had  common  interests,  but 
this  they,  apparently,  could  not  comprehend.  They  turned  aside  from  the  fight 
against  Nature  in  order  to  exterminate  each  other,  in  order  to  destroy  each  other's 
works.  In  their  conflicts  they  even  lost  some  of  the  knowledge,  some  of  the 
secrets  that  they  had  won  from  Nature.  They  fought  each  other,  and,  as  a 
result,  fell  back  before  Nature,  and  then  again  they  advanced  their  fight  against 
Nature,  and  with  some  success.  They  grew  rich,  and  thereupon  they  threw 
their  riches  away.  They  accumulated  power,  and  then  used  it  to  destroy  each 
other.  They  discovered  truth,  and  then  used  it  for  the  extermination  of  their 
fellows.  And  when  they  got  here  and  there  a  glimmer  of  a  great  truth,  they 
erected  this  into  a  revelation  from  God,  and  on  it  they  built  great  systems  of 
religion;  and  then  these  systems  came  into  conflict,  and  thereupon  arose  such 
fighting,  such  woe,  such  loss,  as  let  us  hope  we  shall  never  see  again.        *         * 

But  there  are  reasons  to  believe  that  the  time  is  near  at  hand  when  all  this 
may  in  some  senses  be  changed.  *  *  *  There  is  a  new  idea  at  work 
in  the  world.  An  idea  that  knows  no  hate,  no  prejudice,  no  national  boundaries, 
no  intolerance,  no  superstitions.  The  new  idea— new  in  the  sense  that  it  is  now 
really  making  itself  felt— is 

Co-operation  as  Opposed  to  Competition. 

It  is  perhaps  the  most  prominent  fact  in  the  world  to-day,  and  it  has  assumed  that 
attitude  within  the  last  quarter  of  a  century.  It  now  comprehends  in  some  degree 
all  the  leading  forces  of  modern  life.  It  has  brought  into  alliance— either  wholly  or 
in  part— transportation,  the  creative  industries  and  the  savings  of  the  world.  This 
certainly  changes  the  whole  problem.  This,  if  carried  to  a  proper  conclusion,  will 
not  array  man  against  man,  but  in  solid  ranks  against  Nature  solely.  What  will  be 
added  to  the  wealth  of  the  world  by  such  alliance  is  altogether  beyond  calculation. 
How  much  the  gaunt  figure  of  Hunger  will  be  pushed  back,  and  how  much  the 
burden  of  fear  that  rests  upon  the  hearts  of  the  world  will  be  lightened  by  this 
process,  is  also  beyond  calculation.  But  even  so,  if  there  were  no  process  that 
reached  farther,  the  world  would  still  be  poor.  The  world  would  be  poor  be- 
cause such  co-operation  is,  after  all,  only  the  co-operation  of  force,  it  is  the 
co-operation  that  saves  waste,  it  is  co-operation  based  on  intelligence  and  good 
business  methods  and  sane  processes ;  but  there  is  no  courtesy  or  mercy  in  it, 
no  real  charity,  no  positive  helpfulness. 

The  form  of  co-operation  that  means  most — our  ]>liase  of  it,  life  insurance — 
really  began  to  assert  itself  soonest.  It  taught  the  first  lesson,  which  has 
resulted  in  the  erection  of  the  great  modern  co-operative  industrial  institutions. 


studies  ill  Practical  Life  Insurance  lUl 

Onr  style  of  co-operation  is  not  based  upon  a  day  or  an  hour ;  it  does  not  stand 
upon  simple  negations  nor  tlie  weakness  of  men,  it  is  more  than  a  question  of 
salvage  or  the  elimination  of  hostility;  it  takes  a  much  broader  view.    It  looks 
at  our  picture  of  the  world  of  to-day,  and  while  it  sees  the  significance  of  an 
alliance  between  the  existing  Powers  of  the  world,  it  also  sees  a  much  wider 
alliance,  a  much  vaster  accumulation  of  power.    It  takes  all  these  into  account, 
and  adds  the  living  and  the  unborn  generations  of  men.    It  builds  an  empire  on 
a  co-operation,  which  includes  a  study  of  the  past,  the  duty  of  the  present  and 
the  certainty  and  the  uncertainty  of  the  future.    It  recognizes  the  laws  which 
govern  humanity  as  a  whole,  and  knows  that  birth,  progress  and  death,  genera- 
tion after  generation,  form  a  basis  of  strength  much  sounder  than  the  laws 
that  govern  any  nationality  at  any  given  period  of  time ;  and  that  a  kingdom 
founded  on  consideration  of  that  sort  will  be  wider  and  deeper  and  more  lasting 
than  any  kingdom  the  world  has  ever  seen.    And  not  only  that,  such  co-operation 
has  in  it  an  element  of  courtesy  and  mercy ;  it  has  in  it  all  the  business  wisdom  of  a 
great  trust,  all  the  sane  processes  that  have  taught  men  to  stop  fighting  each 
other,  and,  in  addition,  a  touch  of  something  that  is  closely  akin  to  religion. 
Our  profession  is  this  high  type  of  co-operation.        ****** 
We  have  no  quarrel  with  patriotism.    The  best  patriot  after  all,  is  the  man 
who  so  loves  his  family  that  he  makes  intelligent  sacrifice  for  its  benefit.    But 
patriotism  need  not  be  bloody.     We  hold  that  the  patriotism  of  one  hundred 
years  ago  is  as  much  out  of  place  in  the  twentieth  century  as  the  stage-coach, 
as  much  outgrown  as  the  methods  of  the  witch-doctor  or  the  Indian  medicine 
man.    It  was  not  easy  to  teach  the  world  nationality ;  it  will  not  be  easy  to  teach 
it  internationality,  but  the  lesson  will  be  learned.     We  are  busy  teaching  it. 
We  are  teaching  the  rule  of  the  new  king— the  old  king  is  dying.     We  are 
teaching  the  people  to  know  their  own  power— the  old  fear  is  dying.    We  are 
teaching  the  new  patriotism— the  old  race  hatreds  are  dying,  and  they  die  hard. 
We  are  teaching  the  secrets  of  the  new  wealth — the  old  w^ealth  was  weakness. 
We  are  putting  bands  stronger  than  steel  over  the  border-line  that  otherwise 
separates  the  Past,  the  Present  and  the  Future.     We  are  awaking  a  life  that 
does  not  end  with  the  generations ;  a  memory  that  never  sleeps  and  never  forgets, 
and  never  loses  what  has  once  been  gained. 

We  seek  to  make  some  portion  of  all  effort  immortal,  by  letting  a  heucfi- 
cent  purpose  into  all  civic  life — just  as  science  has  lately  shown  us  is  the  law 
and  the  fact  all  through  the  universe. 

We  are  marshalling  a  great  host  who  are  poor  by  the  old  standards,  and 
rich  by  the  new.  We  do  not  yet  say  that  poverty  can  be  abolished  by  our 
method;  we  know  it  cannot  by  the  old.  We  do  not  say  that  the  grim  figure 
that  pursues  us  can  be  exorcised  by  our  programme;  we  know  that  it  grows 
more  insistent  with  each  year  vinder  the  old  programme.  We  may  never  com- 
pletely banish  poverty,  but  we  can  see  how,  to  the  confusion  of  an  old  adage, 
it  can  be  made  a  fault  always  and  generally  akin  to  a  crime. 

Our  method  is  co-operation  through  life  insurance.  A  co-operation  as  wide 
as  the  world,  as  deep  as  time  and  as  tender  as  love.  A  co-operation  of  the  people, 
by  the  people,  for  the  people.  A  co-operation  of  this  generation  Avith  the  previous 
generation  and  with  all  generations  to  come. 


102  Studies  in  Practical  Life  Insurance 

The  Relation  of  the  State  to  Life  Insurance. 

From  an  Address  before  a  Conference  of  the  leading  Field  Orgartizers  and  Agents  of  the  New- 
York  Life  Insurance  Company  at  Frontenac,   N.   Y.,   September  15-17,    1908. 

I  assume  at  the  outset  that  the  State  has  the  right  to  supervise  the  corpo- 
rations which  it  has  created;  and  it  will  probably  be  conceded  that  such  super- 
vision should  be  appropriate  to  the  nature  of  the  business  and  in  accordance 
with  well  established  economic  laws. 

I  wish  to  call  attention  first  to  the  radical  difference  between  a  life  insurance 
corporation,  and  other  corporations  whose  proper  supervision  is  now  a  matter 
of  public  debate.  Take,  for  example,  a  railroad  corporation.  Its  charter  does  not 
simply  authorize  it  to  engage  in  the  business  of  transportation,  but  it  gives  the 
right  of  eminent  domain.  If  it  needs  your  property  in  order  to  complete  its  line, 
it  has  the  right  to  take  it  by  condemnation  proceedings.  In  other  words,  the 
railroad  receives  a  special  favor  from  the  State  because  of  the  service  it  proposes 
to  render.  When  it  is  ready  for  business  it  may  not,  therefore,  rightfully  charge 
what  it  pleases  and  say,  if  people  don 't  like  its  terms  they  can  buy  transportation 
elsewhere.  The  amount  of  transportation  to  be  done  in  the  country  through 
which  a  railroad  passes  is  limited,  and  any  railroad  built  there  is  limited  to  the 
business  which  the  country  furnishes.  It  takes  a  long  time  and  a  large  amount  of 
money  to  build  and  equip  a  railroad,  hence  in  many  cases  competition  cannot  be 
had.  In  the  case  of  a  street  railroad,  its  tracks  occupy  the  streets  and  leave  no 
room  for  competing  roads.  In  the  case  of  telephone,  electric  light,  and  gas 
companies,  the  streets  must  be  torn  up  and  the  citizens  subjected  to  a  certain 
amount  of  inconvenience  and  loss  before  the  company  can  perform  any  service, 
and  the  number  of  companies  which  can  operate  within  a  given  district  is 
limited  by  these  and  other  considerations. 

But  a  life  insurance  corporation  secures  by  its  charter  no  control  over  private 
property  and  no  privileges  which  are  not  free  to  all  life  companies.  It  claims  no 
right  of  eminent  domain ;  it  occupies  no  public  thoroughfare ;  it  strings  no  death- 
dealing  wires  overhead  or  underground ;  it  digs  up  no  streets ;  it  builds  no  gas 
tanks ;  it  makes  no  dangerous  crossings ,  it  pollutes  no  atmosphere ;  its  operations 
are  noiseless;  new  companies  are  readily  created  and  no  monopoly  is  possible. 
However  desirable  it  may  be,  it  is  not  like  transportation,  or  light— something 
that  people  can't  live  without.  It  is  not  something  that  the  whole  community 
comes  to  depend  upon.  It  is  rather  something  that  no  one  is  vitally  interested 
in,  or  dependent  upon,  except  those  who  voluntarily  engage  in  it,  either  as 
insurers  or  insured.  Except  in  its  general  bearing  on  the  welfare  of  the  State, 
it  is  more  like  a  partnership  or  a  private  business— and  it  takes  corporate  form 
in  order  to  secure  strength,  effective  management  and  perpetuity. 

The  activities  of  men,  both  privately  and  by  means  of  corporations,  may  be 
divided  into  two  great  classes— those  to  which  they  are  driven  by  necessity— 
by  hunger,  by  lack  of  the  comforts  of  life,  and  by  the  desire  of  accumulation  — 
and  those  which  have  their  motive  in  the  higher  impulses— in  affection  and  in 
the  sentiments  of  duty,  justice  and  charity.  And  so  we  have,  on  the  one  hand, 
manufacturing  plants  and  public  service  corporations,  and  on  the  other,  schools, 
libraries,  churches,  asylums,  homes  for  the  aged— and  life  insurance  companies. 


Studies  in  Practical  Life  Inshiance  103 

A  Plea  for  Federal  Supervision  op  Interstate  Insurance, 

Condensed   from  an  Address  on   this  subject  before  the  students  of  the  University  of  Missouri 
on  February  16,  1909,  in  which  it  is  shown: 

1.  That  insurance— which  was  little  used  at  the  time  of  the  formation  of  the 
Constitution— has  now  come  to  be  a  notable  factor  in  the  traffic,  credits,  com- 
merce and  family  life  of  the  country.  That,  until  quite  recently,  it  was  a  local 
affair,  but  it  has  now  become  a  national  affair,  and  even  an  international  afi'air, 
and  its  attempted  regulation  by  46  separate  States  produces  confusion,  injustice 
and  unnecessary  expense. 

2.  That  the  chief  obstacle  to  supervision  by  the  Federal  Government  lies  in 
the  fact  that  the  Constitution  gives  Congress  no  authority  over  insurance  as  such, 
and  that  the  Supreme  Court  has  decided  that  insurance  is  not  commerce,  which 
Congress  is  authorized  to  regulate  between  the  States  as  well  as  with  foreign 
countries. 

3.  That  the  Supreme  Court  has  sometimes  reversed  former  decisions;  tliat 
as  exigencies  have  arisen  the  Federal  Government  has  found  it  necessary  to 
"interfere"  in  matters  theretofore  controlled  by  the  States,  for  the  purpose  of 
executing  some  of  the  general  powers  of  the  Government;  and  that  in  the  case  of 
Champion  versus  Ames,  which  is  known  as  the  "Lottery  Case",  the  Court  has 
virtually  reversed  its  decision  that  insurance  is  not  commerce. 

Mr.  Kingsley  finds  in  the  circumstances  under  which  the  Constitution  was 
adopted  and  in  the  manner  in  which  it  has  been  interpreted  by  all  three  depai-t- 
ments  of  the  Government— especially  by  the  Supreme  Court — certain  historical 
tendencies  working  for  and  securing  certain  national  ideals.  Among  the  subjects 
discussed  are— 

1.  The  Currency. — When  the  Government  under  the  Constitution  was  organ- 
ized it  had  neither  revenues  nor  credit,  and  the  States  were  but  little  better  off. 
There  was  no  national  coinage,  very  few  banks,  and  trade  was  almost  paralyzed 
for  want  of  a  uniform  and  safe  medium  of  exchange.  Alexander  Hamilton,  the 
first  Secretary  of  the  Treasury,  proposed  and  carried  through  the  first  Congress 
measures  for  funding  the  national  debt,  for  assuming  the  debts  of  the  States 
incurred  in  gaining  independence,  and  for  providing  a  revenue  for  the  national 
government.  As  an  agency  in  cariying  out  these  measures  there  was  chartered, 
against  strong  opposition,  a  United  States  Bank.  Mr.  Kingsley  thus  traces  the 
steps  which  finally  led  to  the  present  national  currency. 

The  Constitution  gives  Congress  power  "to  borrow  money  on  the  credit  of 
the  United  States  and  to  coin  money  and  regulate  the  value  thereof,  and  of  foreign 
coin".  The  Constitution  as  a  whole  makes  the  United  States  a  sovereign  nation. 
Now,  notice  the  links  in  the  chain  of  reasoning.  Congress  has  power  to  borrow 
money;  therefore  it  may  charter  a  bank  as  an  aid  in  borrowing  money,  and  a 
bank  so  chartered  may  be  taxed  by  the  States  only  in  such  a  manner  as  Congress 
permits.  Congress  may  borrow  money,  and  the  United  States  is  a  sovereign  nation ; 
therefore  it  may  emit  bills  of  credit  and  make  them  a  legal  tender.  Congress  has 
power  to  borrow  money ;  therefore  it  may  enact  a  national  banking  law  authoriz- 
ing banks  thereunder  to  issue  circulating  notes  based  on  the  securit}^  of  United 
States  bonds  deposited  with  the  Government.  Congress  may  borrow  money; 
having  under  this  power  undertaken  to  supply  the  country  with  a  stable  cur- 


104  Studies  in  Practical  Life  Insurance 

reiicy,  it  may  prevent  the  circulation  as  money  of  any  notes  not  issued  under  its 
authority,  bij  taxing  all  other  issues  out  of  existence.  This  was  going  a  long  way ; 
but  it  was  clearly  one  of  the  occasions  when  Congress  found  it  necessary  to  "inter- 
fere", for  the  purpose  of  executing  its  general  powers. 

2.  Expansion.— Fresident  Jefferson  came  into  office  as  the  head  of  the  party 
of  strict  construction  of  the  Constitution.  The  lower  Mississippi  and  its  mouth 
then  belonged  to  Spain.  It  was  the  natural  outlet  for  the  commerce  of  States 
and  Territories  lying  along  its  banks  and  the  banks  of  tributary  streams. 
The  United  States  secured  the  "right  of  deposit"  at  New  Orleans  under  a  treaty, 
but  when  Spain  sold  the  Louisiana  country  to  France  these  States  and  Terri- 
tories demanded  a  free  outlet  to  the  Gulf.  Jefferson  proposed  and  Congress 
authorized  the  purchase  of  the  Island  of  Orleans  and  West  Florida;  but  when 
Livingston  and  Monroe  were  treating  for  these  Napoleon  offered  to  sell  the  whole 
province  of  Louisiana,  and  the  American  envoys  closed  the  bargain  at  once. 
Jefferson  himself  thought  he  had  done  "an  act  outside  the  Constitution"  in  sign- 
ing the  treaty  and  privately  proposed  to  his  Cabinet  an  amendment  to  the  Con- 
stitution to  legalize  the  transaction.  But  his  friends  urged  him  to  keep  his 
doubts  to  himself,  saying  the  power  of  the  Federal  Government  to  make  treaties 
covered  the  case.  This  view  was  afterward  confirmed  by  the  Supreme  Court. 
Under  this  power  the  Federal  Government  has  since  acquired  Florida,  Oregon, 
Washington,  Idaho,  Texas,  California,  Nevada,  part  of  Colorado,  Utah,  Arizona, 
New  Mexico,  Alaska,  HaAvaii,  the  Philippines,  Guam,  and  Porto  Rico. 

3.  The  "Monroe  Doctrine".  — This  has  no  other  constitutional  standing  than 
this:  the  Constitution  made  the  United  States  a  sovereign  nation  with  certain 
ideals  to  be  pursued,  and  with  which  further  foreign  aggressions  on  this  continent 
would  interfere.  That  we  might  be  strong  to  repel  such  aggression  we  long 
sought  a  naval  base  in  Caribbean  waters,  which  we  finally  secured  in  the  acqui- 
sition of  Porto  Rico,  and  in  order  more  easily  to  defend  both  our  eastern  and  our 
western  coasts  we  acquired  control  over  a  part  of  the  Isthmus  of  Panama,  and 
are  now  constructing  at  great  expense  a  canal  to  connect  the  waters  of  the 
Atlantic  and  the  Pacific. 

4.  Control  of  the  Public  Lands.— Vnder  the  Confederation  several  of  the 
States  ceded  to  the  General  Government  their  claims  to  unorganized  western 
lands,  and  the  possession  of  these  became  a  strong  bond  of  union  on  the  one  hand 
and  of  controversy  on  the  other.  From  these  lands  new  States  were  created:  the 
sale  of  public  lands  brought  in  large  revenues;  and  over  one  hundred  million 
acres  have  been  given  away  for  educational  purposes.  The  word  education  does 
not  occur  in  the  Constitution,  but  homes  and  education  are  among  the  cherished 
ideals  of  the  Republic.  Congress  was  given  power  to  make  all  needful  rules  and 
regulations  respecting  the  territory  and  other  property  of  the  United  States,  and 
from  these  few  words  have  been  deduced  authority  to  govern  territory  belonging 
to  the  United  States  and  absolute  control  of  the  public  lands. 

It  was  the  exercise  of  this  power  in  the  territories  with  respect  to  slavery— or 
the  election  of  a  President  by  a  party  pledged  to  a  certain  course  with  respect 
to  slavery  in  the  territories— that  brought  on  the  Civil  War.  Disunion  had  been 
threatened  a  hundred  times  before,  but  never  seriously  attempted,  and  the  great 


studies  in  Practical  Life  Insurance  105 

question  was  whether  our  dual  form  of  government— local  self-government  by 
the  States  and  a  Federal  Government  supreme  in  matters  delegated  to  it  by  the 
Constitution— could  endure. 

5.  Commerce.— There  was  nothing  the  States  gave  up  control  over  with 
greater  reluctance  than  over  interstate  and  foreign  commerce.  But  this  was  seen 
to  be  necessary  if  anarchy  was  to  be  avoided.  The  question  soon  arose,  "What 
is  Commerce?"  One  of  the  most  far-reaching  and  often-quoted  decisions  on  this 
subject  was  made  by  Chief  Justice  Marshall  in  the  case  Gibbons  versus  Ogden. 
Other  decisions  have  followed  until  commerce,  from  a  legal  standpoint,  includes 
all  the  means,  subjects  and  instrumentalities  of  commercial  intercourse.  AVhen 
steam  came  into  use,  when  the  electric  telegraph  came  into  use,  when  the  tele- 
phone came  into  use— between  States— Avhen  rivers  "between  States  were  bridged 
or  navigated,  the  commerce  clause  of  the  Constitution  was  made  to  cover  them  all. 
The  Federal  Government  has  sometimes  failed  to  act  until  it  was  found  that  the 
States  could  not  separately  aft'ord  proper  control.  This  was  notably  true  of 
interstate  commerce  by  means  of  railroads,  the  Interstate  Commerce  Act,  under 
which  the  Interstate  Commerce  Commission  now  exercises  so  great  control,  hav- 
ing l)een  passed  in  1887— almost  a  century  after  the  adoption  of  the  Constitution. 
President  Kingsley  's  view  is  that  in  all  these  cases  the  Federal  authority  has 
been  gradually  extended,  not  by  usurpation  but  by  legitimate  interpretation  of  the 
powers  granted  under  the  Constitution  for  the  general  good ;  and  that  as  circum- 
stances have  changed,  new  applications  of  principles  have  been  made  by  the  Su- 
preme Court  which  have,  in  some  cases  literally,  and  in  others,  practically,  reversed 
previous  decisions.  The  case  in  which  Mr.  Kingsley  claims  that  former  decisions 
with  respect  to  insurance  have  been  reversed  is  that  of  Champion  versus  Ames, 
or  as  it  is  better  known— the  "Lottery  Case".  In  the  early  history  of  the 
country  lotteries  were  popular  means  of  raising  money  for  charity,  for  govern- 
ment, and  even  for  churches,  but  they  gradually  came  into  disrepute.  States 
passed  laws  against  them  as  local  affairs,  the  United  States  forbade  their  use  of 
the  mails.  Then  foreign  lottery  tickets  were  brought  in  and  sent  by  express  or 
carried  on  the  person.  In  1895  Congress  passed  "An  Act  for  the  Suppression  of 
Lottery  Traffic  through  National  and  Interstate  Commerce  and  the  Postal  Ser- 
vice, subject  to  the  Jurisdiction  and  Laws  of  the  United  States". 

The  case  of  Champion  versus  Ames  arose  under  this  law  and  was  decided  in 
1903.  Counsel  for  the  lottery  people  based  their  argument  largely  upon  the  fact 
that  the  Court  had  previously  held  a  State  law  punishing  traffic  in  lottery  tickets 
from  outside  the  State  to  be  valid— hence  such  traffic  was  not  commerce.  The 
decisions  to  the  effect  that  insurance  was  not  commerce  were  also  cited,  with  the 
argument  that  lottery  tickets  were  like  insurance  policies  in  this,  that  their  value 
depended  upon  chance.  The  Court  did  not  refute  the  contention  that  lottery 
was  like  insurance,  but  it  decided  that  the  carriage  of  lottery  tickets  between 
States  was  interstate  commerce,  and  that  the  power  to  regulate  was  so  complete 
as  to  include  the  power  to  destroy. 

If  interstate  insurance  is  interstate  commerce,  then  it  may  be  regulated  by 
the  Federal  Government  and  not  by  State  Governments.  The  only  way  to  get  a 
decision  on  the  question  raised  is  for  Congress  to  pass  a  law  regulating  interstate 
insurance  and  let  it  be  brought  before  the  Supreme  Court  for  adjudication. 


APPENDIX. 


^''     COMPOUND  INTEREST  TABLE 

ONE  DOLLAR  PRINCIPAL 
The  sum  to  which  One  Dollar  Principal  will  increase, 
at  Compound  Interest,  in  any  number  of  years,  not  exceed- 
ing Forty,  at  3,  3'^,  4,  4'^  and  5  percent,  per  annum. 


•  I 


40 


3  Per 
Cent. 


1  030 
1.061 
1.003 
l.liiG 
1.159 
1.194 
1.230 
1.267 
1.305 
1.344 
1.384 
1  426 
1  469 
1  513 
1.558 
1  605 
1  653 
1  702 
1  754 
1.806 
1  860 
1  916 

1  974 

2  033 
2  094 
2.157 
2.221 
2.288 
2  357 
2.427 
2  500 
2  .575 
2  652 
2.732 
2.814 
2  898 

2  985 

3  075 
3  167 
3.262 


SVi  Per 
Cent. 


1.035 
1.071 
1.109 
1.148 
1.188 
1.229 
1.272 
1  317 
1.363 
1.411 
1.460 
1.511 
1  564 

1  619 
1.675 
1.734 
1.795 
1.857 
1.923 
1.990 
2.059 

2  132 
2.206 
2.283 
2.363 

2.446 
2.532 
2.620 
2.712 
2.807 
2.905 
3.007 
3.112 

3  221 
3.334 
3  450 
3  571 
3  696 
3.825 
3.9.59 


4  Per 

Cent. 


1  040 
1.082 
1.125 
1.170 
1.217 
1.265 
1.316 
1.369 
1.423 
1.480 
1.539 
1.601 
1.665 
1.732 
l.SOl 
1.873 

1  948 
2.026 
2.107 
2.191 

2  279 
2  370 
2.465 
2  563 

2  666 
2.772 
2.883 
2.999 

3  119 
3  243 
3  373 
3.508 
3.648 

3  794 
3.946 
4.104 
4.268 

4  439 
4.616 
4.801 


4^2  Per 
Cent. 


1.045 
1.092 
1.141 
1.193 
1.246 

1  302 
1.361 
1.422 
1.486 
1.553 
1.623 
1.696 
1.772 
1 .  852 
1.935 

2  022 
2.113 
2  208 
2.308 
2.412 
2  520 
2  634 
2  752 

2  876 
3.005 

3  141 
3.282 
3  430 
3  584 
3.745 

3  914 

4  090 
4  274 
4  466 
4.667 

4  877 

5  097 
5.320 
5  566 
5.816 


5  Per 
Cent. 


1.050 
1  103 
1.158 
1.216 
1.276 
1  340 
1.407 
1.477 
1.551 
1.629 
1  710 
1  796 
1.886 

1  980 
2.079 

2  183 
2  292 
2  407 


3  072 
3  225 
3  386 
3  .556 
3  733 

3  920 

4  116 
4.322 

4  538 
4.765 
5.003 

5  253 
5.516 

5  792 
6.081 

6  385 
6  705 
7.040 


To  find  the  sum  to  which  a  piven  amount  will  increase, 
at  compound  interest,  at  any  of  the  rates  per  cent,  and 
number  of  years  expressed  in  the  above  Table: 

Multiply  the  given  amount  by  the  .sum  to  which  one 
dollar  will  increase  at  the  rate  and  for  the  number  of  years 
required,  marking  off  as  many  decimals  fiom  the  product 
a.M  thirc  are  li-cimals  in  the  multiplier  and  multiplicand. 


"^     COMPOUND  INTEREST  TABLE 

ONE  DOLLAR  PER  ANNUM  IN  ADVANCE 
The  sum  to  which  One  Dollar  per  Annum,  paid  at  the 
beKinninst  of  each  year,  will  increase  at  Compound  Interest, 
in  any  number  of  years  not  exceeding  Forty,  at3,  3^.^,  4,  4'.^ 
and  s"  per  cent,  per  annum. 


3  Per 
Cent. 


3^2  Per 
Cent. 


1.030 
2.091 
3.184 
4.309 
5.468 
6.662 
7.892 
9.159 
10.464 
11.808 
13  192 
14.618 
16.086 
17. 599 
19.157 
20.762 
22.414 
24.117 
25.870 
27.676 
29.537 
31.453 
33.426 
35.459 
37.553 
39  710 
41.931 
44  219 
46.575 
49.003 
51.503 
54.078 
56.730 
59.462 
62.276 
65.174 
68.159 
71.234 
74  401 
77.663 


1.035 
2.106 
3.215 
4  362 
5.550 
6.779 
8.0.52 
9  369 
10  731 
12.142 
13  602 
15.113 
16  677 
18.296 
19.971 
21  705 
23.500 
25  357 
27.280 
29.269 
31  329 
33.460 
35  667 
37.950 
40.313 
42.759 
45.291 
47  911 
50.623 
53.429 
56  335 
59.341 
62.453 
65.674 
69.008 
72  458 
76  029 
79.725 
83.. 5.50 
87.510 


1.040 

2.122 

3.246 

4.416 

5.633 

6.898 

8  214 

9.583 

11.006 

12.486 

14.026 

15.627 

17.292 

19  024 

20.825 

22.698 

24.645 

26.671 

28.778 

30.969 

33.248 
35  618 
38  083 
40  646 
43.312 
46.084 
48.968 
51.966 
.55.085 
.58.328 
61.701 
65  210 
68.858 
72.652 
76.598 
80  702 
84.970 
89  409 
94.026 
98.827 


1  045 
2.137 
3.278 

4  471 

5  717 

7  019 

8  380 
9.802 

11.288 
12.841 

14.464 
16.160 
17  932 
19.784 
21.719 
23.742 
.  25  855 
28.064 
30  371 
32.783 

35  303 
37.937 
40.689 
43  5»i5 
46.571 
49  711 
52  993 
56.423 
60.007 
63.752 

67  666 
71.756 
76.030 
80  497 
85.164 

90.041 

95  138 

100.464 

106  030 

111.847 


1  050 
2.153 
3.310 
4. 526 
5.802 
7.142 
8.549 
10.027 
11.578 
13.207 
14  917 


20  579 
22.657 
24  840 
27  132 
29  539 
32  066 
34.719 

37  .505 
4(t  \A0 
-1;!  .".02 
4(;  727 
50  113 
.53  669 
57.403 
61.323 
65  439 
ti9  761 

71  2!  19 


91  >;;»; 

100  62^ 
IOC  710 
113.095 
119.8tH) 
126  840 


To  find  the  sum  to  which  a  given  amount  per  annum 
will  increase,  at  compound  interest,  at  any  of  the  rates 
per  cent,  and  number  of  years  expressed  in  the  above  1  able: 

Multiply  the  given  amount  per  annum  by  the  sum  to 
which  one  dollar  per  annum  will  increase  at  the  rate  and  for 
the  number  of  years  required,  marking  off  a.s  many  decimals 
from  the  product  as  there  are  decimals  in  the  multiplier  and 


Studies  in  Practical  Life  Insurance 


107 


320 

COMPOUND  DISCOUNT  TABLE 

«^     COMPOUND  DISCOUNT  TABLE 

ONE  DOLLAR  PRINCIPAL 

ONE  DOLLAR  PER  ANNUM 

The  present  value  of  One  Dollar  to  be  received  at  the  end 

The  present  value  of  an  Annuity  of  One  Dollar 
payable   at  the  end  of  eiich  ycari,  for  any  numbc 

Annuity 
r  of  years 

of  any  number  of  years,  no 

exceeding  Forty,  discounting  at 

not   exceeding   Korty,  discounting  at  the  rates  of 

3.  3J2.  4. 

the  rates  of  3,  3^,,  4,  4^2  and  5  per  cent 

.Compound  Interest. 

4'..,  and  5  per  cent. Compound  Interest 

414  Per 

5  Per 

w 

S           3  Per 

31.,  Per         4  Per 

m 

3  Per 

3I2  Per 

4  Per 

4V^  Per 

5  Per 

S           Cent 

Cent. 

Cent. 

Cent. 

Cent. 

S 

> 

Cent. 

Cent. 

Cent. 

Cent. 

Cent. 

> 

1 

,971 

.966 

.962 

,957 

952 

1 

.9709 

.9662 

.9615 

.9569 

9524 

1,913 

1.900 

1.886 

1 .  873 

1  H59 

•i 

.94-J(> 

.9335 

.9246 

.91.>7 

9070 

3 

2.829 

2,802 

2.775 

2  749 

2  723 

3 

.9151 

.9019 

.8890 

.8763 

.  S63.S 

4 

3,673 

3  630 

3  588 

3  546 

4 

.  8885 

.8714 

.8548 

.8386 

,  ><227 

5 

4^80 

4,515 

4.452 

4.390 

4,329 

6 

.  Ht>2G 

.  8420 

.8219 

.8025 

,7835 

6 

5,417 

5,329 

5.242 

5,158 

5  076 

6 

.8375 

.8135 

.7903 

.7679 

,7462 

7 

6  2.30 

6.115 

6.002 

5  893 

5.786 

.8131 

.7860 

.7599 

.7348 

,7107 

H 

7  020 

6  874 

6  733 

6  596 

6  4(!3 

8 

.7894 

.7594 

.7307 

7032 

,6768 

9 

7  786 

7.608 

7  4.35 

7,269 

7.108 

9 

.7664 

.7337 

.7026 

.  6729 

,(!416 

10 

8. 530 

8.317 

8.111 

7  913 

7.722 

10 

.7441 

.7089 

.6756 

.6439  . 

,6139 

9  253 

9.002 

8  760 

8  529 

8  306 

n 

7224 

.6850 

.6496 

.6162 

5817 

12 

9  954 

9  6()3 

9.385 

9.119 

8  863 

12 

;7014 

.6618 

.624*; 

.5K97 

,5.-,t)8 

13 

10,635 

10,303 

9,986 

9.683 

9  394 

13 

.6810 

.6394 

.6006 

5»;i3 

5303 

14 

1 1 , 296 

10,921 

10,563 

10  223 

9  899 

14 

.6011 

.6178 

.5775 

.5400 

5051 

15 

1 1 , 938 

11,517 

11.118 

10.740 

10.380 

15 

.6419 

.5969 

15553 

.5167 

.4810 

1G 

12  561 

12  094 

11.652 

11,234 

10.838 

16 

.6232 

,5767 

.5339 

4945 

.4581 

17 

13,166 

12,651 

12.166 

11,707 

11  274 

17 

.6050 

.5572 

.5134 

.473-.i 

.4363 

18 

13.754 

13,190 

12  659 

12  160 

11  690 

18 

.5874 

.5384 

.4936 

.4.528 

.41.55 

19 

14  324 

13  710 

13  134 

12  .593 

12  085 

19 

.5703 

.5202 

.4746 

.4333 

.3957 

20 

14.877 

14,212 

13  590 

13.008 

12:462 

20 

.5537 

.5026 

.4564 

.4146 

.  3769 

15.415 

14.698 

14.029 

13,405 

12  821 

21 

.5375 

.4856 

.4388 

.3968 

.3589 

22 

15  937 

15.167 

14  451 

13  784 

13  163 

22 

.5219 

.4692 

.4220 

.3797 

.3418 

23 

16  444 

15  620 

14  857 

14  148 

13  489 

23 

.5067 

.4533 

.4057 

.3633 

3256 

24 

16:936 

16.058 

15,247 

14:495 

13,799 

24 

.4919 

.4380 

.3901 

.3477 

.3101 

25 

17.413 

16.482 

15,622 

14,828 

14,094 

25 

.4776 

.4232 

.3751 

.3327 

2953 

26 

17.877 

16.890 

15,983 

15.147 

14  375 

26 

.4637 

.4088 

.3607 

3184 

2812 

27 

18.327 

17.285 

16,330 

15,451 

14,643 

27 

.4502 

.3950 

.3468 

.3047 

.2678 

28 

18.764 

17.667 

16.663 

15.743 

14,898 

28 

.4371 

.3817 

.3335 

.2916 

2551 

29 

19  188 

18  036 

16.984 

16  022 

15  141 

29 

.4243 

.3688 

.3207 

.2790 

.2429 

30 

19.600 

18.392 

17.292 

16.289 

15.372 

30 

.4120 

.3563 

.3083 

.2670 

.2314 

31 

20.000 

18.736 

17.588 

16.544 

15  593 

81 

.4000 

.3442 

.2965 

.2555 

.2204 

32 

20  389 

19,069 

17,874 

16,789 

15.803 

32 

.3883 

.3326 

.2851 

2445 

2099 

33 

20  7(i6 

19  390 

18,1  18 

17  023 

16  003 

33 

.3770 

.3213 

.2741 

.2340 

1999 

34 

21,132 

19  701 

18,411 

17,247 

16  193 

34 

3660 

.3105 

.2636 

.2239 

.1904 

35 

21  487 

20.001 

18,665 

17,461 

16  374 

35 

.3554 

.3000 

2534 

.2143 

.1813 

30 

21  832 

20  291 

18  90S 

17,666 

16  547 

36 

.3450 

.2898 

,2437 

.2050 

.  1 727 

37 

22,167 

20.571 

19,143 

17.862 

16,711 

37 

.3350 

.2800 

.2.343 

.1962 

,1644 

38 

22,492 

20.841 

19,368 

18,050 

16  868 

38 

.3252 

.2706 

.2253 

.1877 

1 566 

39 

22,808 

21.103 

19,584 

18,230 

17  017 

39 

.3158 

.2614 

.2166 

.1797 

1491 

40 

23  115 

21.355 

19,793 

18,402 

17  159 

40 

.3066 

.2526 

.2083 

,1719 

1420 

To  find  the  present  value  of  a  gi\ 

en  amount 

to  be  re- 

lo  find  the  present  va 

ue  of  a  Riv 

en  amount  to  be  re- 

ceived  at  the  end  of  each  year,  during 

xny  numbei 

of  years 

ceiv 

sd  at  the  end  of  any 

lumber   of 

years  not  exceeding 

from  One  to  Forty,  at  any  of  the  rates  0 

f  compound 

discount 

For 

ty    at   any  of  the  rates 

of  compoun 

d  discount  expressed 

exprcs.sed  in  the  above  Tabic: 

in  tl 

le  above  Table: 

Multiply  the  given  sum  to  be  receiv 

ed  at  the  en 

d  of  each 

Multiply  the  {riven  anic 

unt  by  the 

present  value  of  one 

year  by  the  present   value   of  one  dolli 

r  per  annu 

n.  at  the 

doll 

ir  at  the  rate  and  for 

the   nam  be 

r  of  years  required. 

rate  and  for  the  number  of  years  reqi 

ired.  marki 

ng  off  as 

mar 

kinK  off  as  many  decii 

nils  from  t 

le  product   as    there 

many  decimals  from  the  product    as  t 

here  are  de 

cimals  iti 

are 

decimals  in  the  inultipl 

iorand  mul 

tiplicand. 

the  multiplier  and  multiplicand. 

Note. — In  these  tables  the  decimal  is  only  carried  out  to  four  places,  the  nearest 
whole  number  being  used  for  the  last  figure.  We  have  usually  used  a  longer  one  in  the 
text;  but  where  a  large  number  of  calculations  are  combined  the  shorter  ones  would 
prove  approximately  correct.  The  second  table  shows  the  present  value  of  one  dollar 
per  year  without  reference  to  the  expiration  of  human  life. 


108  Sttidies  i)i  Practical  Life  Insurance 

TABLE  showing  the  Net  Premiums  Paid,  the  Interest  Received,  the  Death-Claims 
Paid  and  the  Reserve  Fund  on  hand  at  the  end  of  each  year,  for  81,822  Persons  Insuring 
for  $1,000  each  at  age  35— according  to  the  American  Table  of  Mortality  with  interest  at 
three  per  cent,  per  annum. 

Net  Annual  Premium  used,— .$21.08236  to  age  86,  $21,081  age  87  to  92,  $21.08  age  93 
to  end. 


\U'0 

Number 
Surviving 

NiimlxTof 
DeatliH 

Premium:- 

Interest 

Tot.il  Income 

Death 
Chiims 

Reserve  Fund    Reserve 
end  of     |)er*1.0O0( 

35 

81.822 

732 

?1, 724,908.89 

$51,747.27 

$1,770,656.10 

$732,000 

11,044,656.10 

$12.88 

36 

81,090 

737 

1,709,477.43 

82.024.01 

1,792,101.44 

737,000 

2.099,757.00 

20.13 

37 

80.353 

742 

1,693,940.56 

113,810.94 

1,807,751.50 

742,000 

3,105,509.10 

39.70 

38 

79.611 

749 

1.678,298.28 

145.314.22 

1,823,012.50 

749,000 

4,240,121.00 

53.77 

39 

78.862 

756 

1,662,508.43 

177,078.90 

1,839,587.33 

756,000 

5,323.708.93 

08.10 

40 

78.100 

765 

1,046,571.02 

209,108.40 

1,855,079.42 

765,000 

0,414,388.35 

82.94 

41 

77,341 

774 

1,630,443.87 

241,344.97 

1,871,788.84 

774,000 

7,512,177.19 

98.11 

42 

76.567 

785 

1,614,127.00 

273,789.13 

1,887,910.13 

785,000 

8,015,093.32 

113.08 

43 

75,782 

797 

1,597,578.23 

300,380.15 

1,903,958.38 

797,000 

9,722,051.70 

129.05 

44 

74.985 

812 

1,580,776.48 

339,084.85 

1,919.801.33 

812,000 

10,829.913.03 

140.01 

45 

74,173 

828 

1.563,658.52 

371,807.15 

1,935,465.67 

828,000 

11,937,378.70 

162.76 

46 

73,345 

848 

1,540,203.25 

404,507.40 

1,950,710.71 

848,000 

13,040,089.41 

179.87 

47 

72.497 

870 

1,528,326.37 

437,052.47 

1,965,378.84 

870,000 

14,135,408.25 

197.35 

48 

71,627 

896 

1,509,985.69 

409,303.02 

1,979,349.31 

896,000 

15,218.817.50 

215.16 

49 

70,731 

927 

1,491,096.90 

501,297.43 

1,992,394.33 

927,000 

10.284,211.89 

233.28 

50 

69.804 

962 

1,471,554.60 

532,072.99 

2,004,227.59 

962,000 

17.320.439.48 

251.68 

51 

68.842 

1,001 

1,451,274.45 

503,331.42 

2,014,605.87 

1,001,000 

18.340,045.35 

270.34 

52 

67,841 

1,044 

1,430,172.13 

593,100.52 

2,023,278.65 

1,044,000 

19,319.324.00 

289.22 

53 

66,797 

1,091 

1,408,163.32 

021,824.02 

2,029,987.94 

1,091,000 

20.258.311.94 

308.32 

54 

65,706 

1,143 

1,385,163.69 

649,304.27 

2,034,467.96 

1,143,000 

21,149,779.90 

327.58 

55 

64,563 

1,199 

1,361,067.84 

675,325.43 

2,030,393.27 

1,J99,000 

21.987.173.17 

347.00 

56 

63,364 

1,260 

1,335,791.44 

699,088.94 

2.035,480.38 

1,260,000 

22.702.053.55 

366.52 

57 

62.104 

1,325 

1,309,229.08 

722,156.48 

2,031.385.56 

1,325.000 

23.409,039.11 

386.14 

58 

60.779 

1,394 

1,281,296.44 

742,510.07 

2,023,806.51 

1.394,000 

24.098.845.02 

405.81 

59 

59.385 

1,468 

1,251,909.20 

760.522.64 

2,012,431.84 

1,408.000 

24.043.277.40 

425.49 

60 

57,917 

1,546 

1,220,961.95 

775.927.18 

1,996,889.13 

1,546,000 

25,094.100.59 

445.16 

61 

56,371 

1,628 

1,188,370.35 

788.470.11 

1,976,846.46 

1,628,000 

25,443,013.05 

464.77 

62 

54,743 

1.713 

1.154,050.10 

797.911.89 

1,951.961.99 

1.713,000 

25.081.975.04 

484.29 

63 

53,030 

1.800 

1,117,937.95 

803,997.39 

1,921,935.34 

1,800,000 

25.803.910.38 

503.69 

64 

51,230 

1,889 

1.079,991.72 

806,517.00 

1,880,508.78 

1,889,000 

25,801,419.10 

522.92 

65 

49,341 

1,980 

1,040,169.27 

805.247.05 

1.845.410.92 

1,980,000 

25.000.830.08 

541.94 

66 

47,361 

2,070 

998,428.42 

799.957.94 

1,798.380.30 

2,070.000 

25.395.222.44 

500.71 

67 

45,291 

2,158 

954,790.26 

790.500.38 

1,745,290.04 

2.158,000 

24,982.513.08 

579.20 

68 

43,133 

2.243 

909,296.95 

776,754.30 

1,080,051.25 

2,243,000 

24,425,504.33 

597.35 

69 

40,890 

2,321 

802,011.74 

758,627.28 

1,020,039.02 

2,321,000 

23,725,203.35 

015.14 

70 

38.569 

2,391 

813.082.19 

736.148.57 

1.549,230.70 

2.391,000 

22.883.434.11 

032.52 

71 

36.178 

2,448 

762,676.96 

709,383.33 

1,472,000.29 

2,448,000 

21.907,494.40 

649.50 

72 

33,730 

2,487 

711,070.09 

678.556.93 

1.389.627.02 

2,487,000 

20.810.121.42 

666.07 

73 

31.243 

2.505 

658,641.06 

644,062.87 

1,302.703.93 

2,505,000 

19,607,825.35 

682.30 

74 

28,738 

2.501 

605,832.56 

606,409.74 

1,212,242.30 

2,501,000 

18,319,007.65 

698.21 

75 

26,237 

2.476 

553,108.39 

566.165.28 

1,119,273.67 

2,476,000 

10,902,341.32 

713.87 

76 

23,761 

2.431 

500,911.25 

523,897.58 

1.024.808.83 

2,431.000 

15,556,150.15 

729.31 

77 

21.330 

2.369 

449,602.70 

480,174.39 

929.837.15 

2,369,000 

14.116,987.30 

744.53 

78 

18,90'. 

2,291 

399,721.32 

435,501.26 

835.222.58 

2,291,000 

12,661,209.88 

759.52 

79 

16,670 

2,196 

351,424.20 

390.379.02 

741,803.22 

2,196,000 

11.207.013.10 

774.29 

80 

14,474 

2,091 

305,129.81 

345,364.29 

050,494.10 

2,091,000 

9,766.507.20 

788.70 

81 

12,383 

1,964 

201,048.95 

300,826.68 

501,875.03 

1,904,000 

8,304„382.83 

802.80 

82 

10,419 

1,816 

219,045.40 

257,520.85 

477,166.25 

1,816,000 

7.025.549.08 

816.64 

83 

S.C03 

1,648 

181,301.87 

216,207.33 

.397.569.20 

1,648,000 

5.775.118.28 

830.35 

84 

0,955 

1.470 

146,620.01 

177.052.15 

324.272.16 

1,470,000 

4,029.390.44 

844.01 

85 

5,485 

1.292 

115,630.58 

142.350.03 

257.981.21 

1,292.000 

3.595.371.65 

857.47 

86 

4,193 

1,114 

88.392.48 

110.512.92 

198.905.40 

1,114.000 

2,680.277.05 

870.50 

87 

3,079 

933 

04.908.40 

82,355.50 

147,203.90 

933,000 

1,894.541.01 

882.82 

88 

2,146 

744 

45.239.83 

58.193.43 

103.433.20 

744,000 

1.253.974.27 

894.42 

89 

1,402 

555 

29,555.50 

38.505.90 

68.061.46 

555,000 

707.035.73 

905.59 

90 

847 

385 

17,855.61 

23,540.74 

41.402.35 

385,000 

423.438.08 

916.53 

91 

402 

216 

9.739.42 

12,995.33 

22,734.75 

246.000 

200.172.83 

926.73 

92 

216 

137 

4.553.50 

0,141.79 

10;695.29 

137.000 

73.808.12 

935.04 

93 

79 

58 

1,005.32 

2.206.00 

3,931.32 

58,000 

19.799.44 

942.83 

94 

21 

18 

442.68 

007.20 

1.049.94 

18.000 

2.849.38 

949.7P 

95 

3 

3 

03.24 

S7.38 

150.62 

M.OOO 

00.00 

1.000.00 

studies  in  Practical  Life  Insurance 


109 


NET    EFFECTIVE    RATES    OF    INTEREST,    1908. 
A.     DHRIVED   FROM   COMPANY'S  ENTIRIC  FUNDS. 


Mean     amount     of     Funds     drawing 

Interest: 
Entire  Assets,  on  basis  of  Company's 

Booii    Values    

(a)   Liabilities    not    required    to    bear 
interest: 

1.  Surrender    Values     unsettled.. 

2.  Policy   Claims   unsettled 

3.  Unpaid  on  supplementary  con- 
tracts not  Involving  life  con- 
tingencies      ■ 

4.  Interest   in   advance    

5.  Commissions  due   to  agents... 

6.  Accrued    Expenses     \ 

7.  Accrued    Taxes    j 

8.  Due  agents  under  NYLIC  con- 
tracts      

9.  Reserve  for  death-claims  not 
yet  reported  at  Home  Office.. 

10.  Dividends    unpaid    


(b)   Liabilities    normally    drawing    in- 
terest: 

1.  Policy    Reserve    

2.  Trust    Funds    

3.  Premiums  paid  in  advance 

4.  Additional  Policy  Reserve    

5.  Interim    Accumulation    Fund.. 

6.  Contingency  Funds,  on  basis 
of  Assets  admitted  by  Insur- 
ance Department  of  New  York 

7.  "Latent  Fund  for  Contingen- 
cies and  Dividends",  on  basis 
of   Company's    Book   Values... 

8.  Dividends     

9.  Dividends  left  with  Company 
to  accumulate  at  interest 

10.  Reserve   for  NYLIC  contracts. 


31/32 


Total  of  (a)  and  (b) 

Funds  represented  by  Liabilities  nor- 
mally drawing  interest  (b)   

Mean  amount  of  Funds  represented 
by  Liabilities  normally  drawing  in- 
terest      

I.   Net     Income    from     Interest,     Rents 
and    Profits: 
Interest  and  Rents  due  and  accrued 

Dec.   31    

Deduct  interest  paid  in  advance 


Increase  in  net  Interest  and  Rents 
due    and    accrued 

Interest  and  Rent  received  in  1908, 
after  deduction  of  miscellaneous 
interest    payments    ($8,378) 

Net  profit  on  sale  or  maturity  of 
ledger    assets     

Other  profits  (Items  32  and  34  and  35 
of    Income)     


UKC.  : 

ability  No. 

11,    lilOT. 

Amount. 

$516,762,763 

IJ 

Liiibilitv  N. 

10 
17 

$257,562 
3,094,070 

10 
17 

IS 
20 

21/22 

24/26 

0 
1.599.730 
65,448 

105.695 

18 

21 
22/23 
f    25/26 
■)       27 

41 

40 

30 

439,721 

31 

$5,562,226 

8 
9 
19 
34 
33 

$432,872,357 

2,099,624 

712,149 

2,791.558 

35,863,716 

8 
9 
20 
35 
34 

$559,422,543 


$267,687 
3,355,971 


199 

1.950,243 

59,160 

190,150 

762,674 

26,770 

500,000 
412,618 


$7,525,472 


$459,209,411 

2,319,830 

812,888 

3,129,402 

67,181,561 


22.353.955 
6,200,938 

32/33 

2.135.872 
7,602.905 

19 
42 

1.278 
557.081 

$511,200,537 
516,762,763 

$551 ,897,071 
559.422.543 

$511,200,537 

.$531,548,804 

$551,897,071 

$5,593,353 

1,599.730 

118,981 

$6,062,847 
1,950.243 

$3,993,623 

$4,112,604 

23,343,809 

27.188 

96,185 

$23,586,163 

110  Studies  in  Practical  Life  Insurance 

DKC.  .U.   l'.(.-.  UKC.  31.   1908. 

Deduct:  Amount.  Amount. 

Taxes  on  Real  Estate    168,698 

Expenses  on  Real  Estate 290,507 

Income  Tax  on  Interest  Receipts 17,640. 

Expenses  involved  in  general  care 
of  investments,  and  in  care  of  all 
policies  (including  paid-up  poli- 
cies) in  respects  which  have  no 
reference  to  premiums  received, 
and  which  may  therefore  be 
properly  considered  a  charge  in 
proportion  to  the  policy  reserve: 
3/16%  of  the  mean  invested  as- 
sets; i.  e.,  3/16%  of  $523,214,913 
(consisting  of  the  mean  "total 
ledger    assets";     less    the    mean 

(1)  of  cash   in   Company's   office, 

(2)  of  cash  in  Company's  Branch 
Offices,  (3)  of  cash  in  banks  not 
on    interest,    and    (4)    of    Branch 

Office    balances)    981.028 

Net    decrease    in    Book    Value    of 

ledger   assets    45,744 

Doubtful    debts    marked    off    ($19,- 

881,    plus    $899    included    in    item 

14  of  Disbursements) 20,780 

Exchange      60.330  1,590,727  $21,995,^ 


III.   Divisor   for   calculation    of    Net    Ef- 
fective   Rate   of   Interest: 
Mean  amount  of  Funds  drawing  in- 


terest  (see  I  above)    $531,548,804 

Deduct   %    of  net  income    (under  II) 

from  Interest,   Rents  and  Profits 10,997,718 

Divisor  for  calculation  of  Net  Effect-  

ive  Rate  of  Interest   $520.551 .086 


IV.  Net  Effective  Rate  of  Interest  is  equal  to  II  divided  by  III;  or  $21,995,436^ 
$520,551,086  =  4.225%.  This  rate,  derived  from  the  Company's  entire  Funds, 
is  applicable  to  Gain  and  Loss  Accounts  of  insurances  in  the  Company's 
several  classes  of  participation  in  profits,  where  such  insurances,  of  the 
same  mode  of  participation  in  profits,  were  issued  both  in  and  outside  the 
territory  subject  to  the  French  Insurance  Law  of  March  17,  1905. 


B.    .DERIVED  FROM  COMPANY'S  FUNDS  EXCLUSIVE  OF  FRENCH 
INVESTMENTS   [FRENCH  BONDS]. 
Net  Income  from   Interest,  Rents  and   Profits: 

Amount  of  Item   A  II   above $21,995,436 

Deduct   one    year's    gross    effective    interest    on    French    Bonds,    3.3089%    of 

$5,993,475     $198,317 

Less  3/16%   of  $5,993,475    11,238  187,079 


II.  Divisor  for  calculation  of  Net  Effective  Rate  of  Interest: 

Amount  of  Item  A  III  above 

Deduct  book  value  of  French  Investments  [French  Bonds]  forming  part  of 
the  Company's  deposit  as  at  June  30,  1908,  under  the  provisions  of  the 
French  Law  of  March   17,   1905 


III.  Net  Effective  Rate  of  Interest  is  equal  to  I  divided  by  II;  or,  $21,808,357  -^ 
$.014,557,611  =  4.238%.  This  rate  derived  from  the  Company's  Funds  ex- 
clusive of  French  Investments  [French  Bonds],  is  applicable  (1)  to  Gain 
and  Loss  Accounts  of  Insurances  of  the  Company's  several  classes  of  partic- 
ipation In  profits  where  all  Insurances  of  the  same  mode  of  participation 
in  profits  were  Issued  exclusively  outside  the  territory  subject  to  the 
Krenili  Insurance  Law  of  March  17,  1905;  and  (2)  to  each  and  every 
individual  policy  Is.sued  outside  the  French  territory. 


$21,808,357 


$514,557,611 


Studies  in  Piactical  Life  Insurance  111 

C.     DERIVED  FROM  DEPOSIT  WITH  FRENCH  GOVERNMENT,   PER   RESOLUTION* 
OF  BOARD  OF  TRUSTEES,   DECEMBER  9,   1908. 

I.  /-v'j.      nts   taken   for  the   present   interest-rate   calculation,   as   representing   tlie 

st'tus  June  30,    i908,  of  the  Company's  deposit  with  the  French  Government:  Hock  VuIikh. 

French   InvesLuients    [French   Bonds]    ; 15,993,475 

American     Securities     18,699,088 

Policy  Loans  outstanding  2,115,676 

Real    Estate    1,300,000 

$28,108,239 

II.  Net  Effective  Interest  taken  for  the  calendar  year  1908: 

One  year's  gross  effective  interest  on  French  Bonds,  3.3089%  of  $5,993,475. .  $198,317 

Deduct   3/16%    of   $5,993,475    11,238 

$187,079 

Net  Effective  Interest  on  lemainder  of  the  deposit,  4.238%  of  $22,114,764 937,224 

$1,124,303. 

III.  Net  Effective  Rate  of  Interest  is  equal  to  II  -4-1;  or,  $1,124,303  -4-  $28,108,239 
=:  4.00%.  This  rate,  derived  from  deposit  with  the  French  Government,  per 
Resolution  of  the  Board  of  Trustees  December  9,  1908,  is  applicable  to  all 
in.surances  issued  witliin  the  territory  subject  to  the  French  Insurance  Law 
of  March  17,  1905. 

■^Resolved,  further — in  view  of  the  opinion  *  *  *  that  the  new  French  Law  creates  and 
establishes  a  new  class  made  up  of  the  P'rench  and  Algerian  policy-holders  giving  to  that  class 
the  benefit  of  any  additional  security  created  by  the  investments  and  deposits  which  must  be 
made  in  compliance  with  the  provisions  of  said  law — that  from  the  date  of  the  deposit  of  the 
securities  by  the  Company,  pursuant  to  the  requirements  of  the  French  Government,  the 
participating  policy-holders  heretofore  insured  or  hereafter  to  be  insured  in  France  and  Algeria 
shall,  as  regards  interest  earnings  only,  be  placed  by  the  Officers  of  the  Company  in  a  Special 
Class  to  be  known  as  the  French  Class;  and  in  calculating  the  profits  ordividends  to  be  hereafter 
apportioned  and  paid  to  members  of  that  class,  the  rate  of  interest  used  shall  be  the  rate 
actually  yielded  by  the  investments  forming  tlie  deposit  under  the  provisions  of  the  French 
Law,  provided  that  until  1912,  on  tliat  portion  of  the  Company's  reserves  deposited  with  the 
French  Government  represented  by  American  securities,  by  real  estate  and  by  policy  loans,  the 
interest  rate  used  in  calculating  such  dividends  shall  be  the  average  interest  rate  on  the 
Company's  invested  assets  excluding  the  French  Investments  [French  Bonds]  already 
referred  to. 


ASSESSMENT    OF    EXPENSES,    1908. 
(Without  deduction  of   Re-insurance   Premiums  or  Commissions.) 

A.     PRELIMINARY   CALCULATION  FOR  GAIN  AND  LOSS   ACCOUNTS  OF 
DIVIDEND   CLASSES. 

I.  Insurance  Expenses  chaigeable  to  Annual  I'remiums,  consisting  of  the  following: 

Entire  expenses,  without  deduction  of  reinsurance  commissions,  $5,985; — and  excluding 
(1)  Real  Estate  taxes  and  expenses,  $465,205;  (2)  Income  Tax  on  Interest  Receipts, 
$17,640;  (3)  Gross  loss  on  sale  or  maturity  of  ledger  assets,  $342;  (4)  Gross  decrease 
in  book  value  of  ledger  assets,  $242,158;  (5)  Miscellaneous  interest  payments,  $8,378; 
(6)    Excliange,   $60,330;     (7)    Doubtful   debts   marked  off,    $19,881,   plus   $899   included   in 

Item    14   of   Disbursements $10,017,102 

Deduct. 

(a)  Policy    Fees     $30,539 

(b)  3/16%    of   mean   invested   assets    (see    calculation 

of  effective  rate  of  interest  for  1908) 981,028 

(c)  Expense    on    annuities    (five    per   cent,    of    $436,222 
annuity    considerations,    and    of    $22,200,     renewal 

premiums  on   deferred  annuities) 22,921 

(d)  Expenses  on  single  premiums   (7»4%  of  $36,371)...  2,728  1,037,216 


II.  First    Year's    Commissions   and    Bonuses    (excluding   com- 
missions on  annuities  and  on  single  premiums): 

(a)  Commissions   on   first  year's  premiums $2,431,724 

(b)  Bonuses     1,010 

(c)  Commissions    advanced    7,082 

(d)  Salaries  paid   soliciting  agent;^ 12,697 


$8,979,886 


$2,452,513 


112  Studies  in  Practical  Life  Insurance 

III.  Physicians'    Fees.    $238,008;     Bureau   of  Investigation,    $62,- 

690;    Less   Policy  Fees,   $30,539 270,153 

IV.  Direct   Acquisition   Expenses    (II  +  III) $2,722,672 

V.  Commissions   on    Renewal    Premiums.    $933,127;     Collection 

Fees,   $60,599;  Commuted   Renewal  Commissions,  $82,746.  1.076,472 

VI.  General  Expenses   (I,   less  IV  &  V) 5.180,742 


VII.   Premiums,    1st   Year    (Annual) 

VIII.  Premiums — Renewal  with  Commission,  Renewal  with  Col- 
lection Fees,  and  Renewal  without  charge  (not  includ- 
ing renewal  premiums  on  deferred  annuities) 


IX.   Entire   Annual   Premiums    (VII    +    VIII) $77,561,492 

X.   Expense    ratio    on    1st    Year's    pre- 
miums   exclusively     ( IV  -^  VII) 50.53% 

XI.   Expense   ratio   on    Renewal    premi- 
ums   exclusively    (V -^- VIII) .  . . .   1.49% 

XII.   Expense     ratio     on     entire     annual 

premiums     (VI  -~  IX) 6.68% 

XIII.  Entire   ratio   on    1st   Year's   premi- 

ums            (X  4- XII) 57.21% 

XIV.  Entire  ratio  on  Renewal  premiums     (XI  -j-  XII) 8.17% 


B.     SPECIAL    CALCULATION    FOR    CONTRIBUTION    ANNUAL    DIVIDEND    RATES. 

I.     Adjusted    Premiums. 

1.  Premiums   received    

2.  Ordinary  Life  element   


Adjusted  Premiums,  being  the  mean  between 
1    and    2 


II.     Expenses:      1st    Year;      Renewal. 

1.  Commissions:     1st    Year;     Renewal 

2.  Other  Expenses,   exclusively  1st  Year... 


3.  Total  Expenses  chargeable  exclusively  to  1st 
Year  and  to  Renewal  Premiums  received, 
respectively     


III.     General     Expenses. 

IV.     Expense   Ratios. 

1.  1st  Year  and   Renewal   (II  -f-  1) 

2.  General  Expenses  (III  -^  I)   

3.  Entire    Expense    Ratios    chargeable    to    Ad- 

justed   1st    Year    and    Renewal    Premiums, 

respectively     64.44%  9.56% 


On  1st  Year's 
Premiums. 
$5,388,000 
4,229,000 

On  Renewal 
Premiums. 
$72,173,000 
50,837,000 

Total. 

$4,808,000 

$61,505,000 

$66,313,000 

$2,453,000 
270,000 

$1,076,000 

$2,723,000 

$1,076,000 

1.75% 
7.81% 

$5,181,000 

56.63% 
7.81% 

7.81% 

TAXES    PAID    BY    THE    NEW-YORK    LIFE    INSURANCE    COMPANY    IN    1910. 

Alabama. — Total  taxes,  $10,100.75  made  up  as  follows:  On  premiums  less  dividends  @ 
Vf,  .$9,101.92;  State  licenses  $111;  State  fees  $10;  Agents'  licenses,  State  $168; 
Local  $639.02;  Personal  property  tax  $25.99;   City  premium  tax  $44.82. 

Arizona.— Total  taxes,  $5,263.67,  made  up  as  follows:  On  premiums  @  2':'r,  $5,087.87; 
Territorial  license  $5;  Territorial  fees  $7.50;  Agents'  licenses.  Territorial  $132; 
Local  $20;  Personal  property  tax  $11.30. 

Arkansas. — Total  taxes,  $7,218.87,  made  up  as  follows:  On  premiums  less  losses,  endow- 
ments and  commissions  @  iy2.''i ,  $7,092.12;  State  license  $2;  State  fees  $60;  Agents' 
licenses.  State  $58;  Personal  property  tax  $6.75. 

California. — Total  taxes,  $21,499.57  made  up  as  follows:  On  premiums  @  1%,  $19,728.23; 
State  licenses  $20;  State  fees  $98.25;  Agents'  licenses,  State  $228;  local  $543;  City 
premium  tax  $789.10;  Personal  property  tax  $92.99. 


Studies  in  Practical  Life  Insurance  113 

Colorado.— Total  taxes,  $14,209.65  made  up  as  follows:     On  premiums  (a)  2%,  $13,964.19; 

State  license  $5;   State  fees  $61.80;  Agents'  licenses,  State  $134;   Personal  property 

tax  $44.66. 
Connecticut. — Total   taxes,   $5,569.72    maxie   up   as   follows:      On    premiums    less   annual 

dividends    @    1%,    $5,548.56;    State   license    $10;    State   fees    $10;    Agents'    licenses. 

State  $1.16. 
Delaware. — Total  taxes,  $1,570.15  made  up  as  follows:     On  premiums  @  2%,  $1,453.15; 

Stiite  license  $27;  State  fees  $15;  Agents'  licenses.  State  $75. 
Dist.  Columbia. — Total  taxes,  $3,700.37  made  up  as  follows:  On  premiums  less  dividends 

@  1%%,  $3,549.79;  District  license  $10;   District  fees  $6;   Agents'  licenses.  District 

$134.58. 
Florida. — Total  taxes,   $10,075.42   made  up  as  follows:      On  premiums   @   2'A ,  $9,288.42; 

State  license  $200;  State  fees  $10;  Agents'  licenses,  State  $295;  Local  $282. 

Georgia. — Total  taxes,  $9,317.81  made  up  as  follows:      On  premiums   @   1%,   $7,323.91; 

State  licenses  $40.50;   State  fees  $9.80;   Agents'  licenses.  State  $252;   Local  $907.20; 

City  taxes  on  premiums  $780.54;  Personal  property  tax  $3.86. 
Idaho. — Total  taxes,  $3,426.49  made  up  as  follows:     On  premiums  less  losses  and  endow- 
ments @  2'f,  $3,221.49;   State  licenses  $50;   State  fees  $20;   Agents'  licenses,  State 

$135. 
Jllinois. — Total  taxes,   $57,404.07  made  up  as  follows:      On  premiums  less  annual  divi- 
dends @  1%,  $56,630.51;   State  licenses  $1;   State  fees  $115;  Agents'  licenses,  State 

$560;  Personal  property  taxes  $97.56. 
Indiana. — Total  taxes,  $20,454.50  made  up  as  follows:      On  premiums  less  death-losses 

@  3^/,  $20,130.81;    State  licenses  $5;    State  fees  $75;   Agents'  licenses,  State  $207; 

Local  $34.50;  Personal  property  tax  $2.19. 
Iowa.— Total  taxes,  $21,872.23  made  up  as  follows:     On  premiums  @  21/2%,  $21,676.96; 

State  license  $2;    State  fees  $20;    Agents'   licenses,   State  $142;    Personal   property 

taxes  $31.27. 
Kansas.— Total  taxes,  $12,780.73  made  up  as  follows:    On  premiums   @   27^,  $12,454.59; 

State  fees  $100;  Agents'  licenses.  State  $114,  Local  $110.75;  Personal  property  taxes 

$1.39. 
Kentucky. — Total  taxes,  $16,695.26  made  up  as  follows:    On  premiums  @  2  9r,  $15,743.51; 

State  license  $1.00;   Agents'  licenses.  State,  $220,  Local  $385.33;   City  premium  tax 

$276.44;  Personal  property  tax  $68.98. 

Louisiana. — Total  taxes,  $16,047.80  made  up  as  follows:  On  premiums  @  6/10  of  lOf. 
$7,740;  State  license  $10;  State  fees  $303.80;  Agents'  licenses,  State  $220,  Local 
$352.40;  City  premium  taxes  $7,320;  Personal  property  taxes  $101.60. 

Maine. — Total  taxes,  $4,617.37  made  up  as  follow^s:  On  premiums  @  l%9r,  $4,492.57; 
State  license  $20;  Agents'  licenses,  State  $94;  Personal  property  tax  $10.80. 

Maryland.— Total  taxes,  $11,244.44  made  up  as  follows:  On  premiums  @  \yz%, 
$10,642.83;  State  license  $300;  State  fees  $105.80;  Agents'  licenses.  State  $178; 
Personal  property  taxes  $17.81. 

IVIassachusetts.^Total  taxes,  $42,882.06  made  up  as  follows:  On  reserve  @  %  of  19^, 
$42,404.72;  State  fee  $20;  Agents'  licenses.  State  $428;  Personal  property  tax  $29.34. 

Michigan.— Total  taxes,  $20,703.67  made  up  as  follows:  On  premiums  @  29'f,  $20,688.63; 
State  fees  $5;  Personal  property  tax  $10.04. 

Minnesota. — Total  taxes,  $15,506.27  made  up  as  follows:     On  premiums  @  29f,  $15,153.83; 

State  license  $2;  State  fees  $153.86;  Agents'  licenses,  State  $152;  Personal  property 

tax  $44.58. 
Mississippi. — Total  taxes,  $4,752.40  made  up  as  follows:     On  premiums  first-year  @  2% 

and  on  premiums-renewal  of  policies  issued  since  March  5,   1902,    @   1/10  of  1%, 

$2,274.48;  State  licenses  $250;  State  fees  $26;  Agents'  licenses,  State  $1,386.92,  Local 

$815. 
Missouri. — Total  taxes,  $43,979.33  made  up  as  follows:     On  premiums  @  2%,  $43,112.11; 

State  license,   $1.00;    State  fees   $40;    Agents'   licenses.   State   $354,   Local  $435.10; 

Personal  property  tax  $37.12. 

Montana. — Total  taxes,  $11,242.24  made  up  as  follows:  On  premiums  @  2%,  State 
$6,921.79;  County  @  3.167r,  $4,109.37;  State  fees  $35;  Agents'  licenses.  State  $155, 
Local  $13;  Personal  property  tax  $8.08. 

Mebraska. — Total  taxes,  $8,811.79  made  up  as  follows:  On  premiums  @  2%,  $8,704.47; 
State  license  $2;  State  fees  $26;  Agents'  licenses.  State  $68;  Personal  property  tax 

$11.32. 


114  Studies  in  Practical  Life  Insurance 

Nevada. — Total  taxes,  $145.90  made  up  as  follows:     State  license  $100;   State  fees  $20; 

Agents'  licenses,  Local  $20;  Personal  property  tax  $5.90. 
New  Hampshire. — Total  taxes,  $3,073.67  made  up  as  follows:     On  premiums  less  death- 
losses  (f/   2':r,  $3,033.67;  State  license  $5;  State  fees  $15;  Agents'  licenses.  State  $20. 
New  Jersey. — Total  taxes,   $7,791.02  made  up  as  follows:      On   premiums   less   annual 

dividends  @  I'/r,  $7,535.32;    State  fees  $20;   Agents'  licenses,  State  $226;    Personal 

property  tax  $9.70. 
New  Mexico.— Total  taxes,  $2,867.88  made  up  as  follows:     On  premiums  less  dividends 

@  2 Or,  $2,806.88;  Territorial  license  $2;  Territorial  fees  $20;  Agents'  licenses,  terri- 
torial $24.  Local  $15. 
New   York. — Total  taxes,  $119,819.08  made  up  as  follows:      On  premiums  less   annual 

dividends  @  V/r,  $119,424.59;  State  fees  $315;  Agents'  licenses,  State  $79.49. 
North   Carolina.— Total  taxes,   $9,447.59  made  up  as  follows:      On  premiums    @    2^/2 9^, 

$9,119.59;   State  license  $250;  State  fees  $27;  Agents'  licenses,  State  $51. 
North    Dakota.— Total   taxes,    $9,324.43   made   up   as   follows:      On   premiums    @    2y2<7c^ 

$8,908.69;  State  license  $2;  State  fees  $353.90;  Agents'  licenses,  State  $44;  Personal 

property  taxes  $15.84. 
Ohio.— Total  taxes,  $57,565.32  made  up  as  follows:     On  premiums  @  2y2'/<:,  $57,130.87; 

State  license  $2;  State  fees  $134.18;  Agents'  licenses.  State  $277;  Personal  property 

tax  $21.27. 
Oklahoma.— Total  taxes,  $11,036.02  made  up  as  follows:     on  premiums  less  dividends 

@  29^,  $10,771.02;  State  license  $200;  State  fees  $20;  Agents'  licenses,  State  $45. 
Oregon.— Total  taxes,  $1,304.33  made  up  as  follows:     On  premiums  less  dividends  and 

policy  claims  @  27. ,  $770.33;   State  license  $100;   State  fees  $29;   Agents'  licenses^ 

State  $365,  Local  $40. 
Pennsylvania.— Total    taxes,    $85,012.14    made    up    as    follows:      On    premiums    @    2%^ 

$84,456.14;  State  license  $2;  State  fees  $20;  Agents'  licenses,  State  $468,  Local  $66, 
Rhode  Island. — Total  taxes,  $5,397.23  made  up  as  follows:    On  premiums  @  2':r,  $5,320.52;. 

State  fees  $34;  Agents'  licenses.  State  $36;  Personal  property  tax  $6.71. 
South  Carolina.— Total  taxes,  $23,288  made  up  as  follows:     State  tax  on  premiums  less 

dividends    (a)    2'/(,   $8,117.38;    County   taxes    (for  1907-1908   paid   in   1910   under   law 

since  repeaTed)  on  premiums  @  1.537r,  $14,085.58;  State  license  $150;  State  fee  $100;. 

Agents'  licenses.  State  $20.50,  Local  $807.50;  Personal  property  tax  $7.04. 
South    Dakota.— Total   taxes,    $5,473.56   made   up   as   follows:      On   premiums    @    2'^^f/c, 

$5,227.06;  St^te  license  $2;  State  fees  $194.50;  Agents'  licenses,  State  $50. 
Tennessee.— Total  taxes,  $18,134.88  made  up  as  follows:      On  premiums  less  dividends 

used  in  reduction  of  premium-payments,  @  2y2  9f,  $17,544.88;  State  fees,  $25;  Agents' 

licenses  $565. 
Texas.— New-York  Life  Insurance  Company  is  not  transacting  business  in  this   State, 

on  account  of  oppressive  laws. 
Utah.— Total  taxes,  $5,351.41  made  up  as  follows:     On  premiums  @  IVz'^c  less  State  tax 

on  personal  property,  $5,203.11;   State  license  $5;   State  fees  $65;   Agents'  licenses. 

State  $58;  Personal  property  tax  $20.30. 
Vermont.- Total  taxes,  $4,773.10  made  up  as  follows:     On  premiums  less  dividends  @ 

27r,  $4,650.10;  State  licenses  $55;  State  fees  $20;  Agents'  licenses  $48. 
Virginia. — Total  taxes,  $8,129.95  made  up  as  follows:     On  premiums  @  1  1  'lOTc  $6,730.44; 

State  licenses  $76.67;   Agents'  licenses.  State  $79,  Local  $1,221.25;   Local  premium 

taxes  $17.44;  Personal  property  taxes  $5.15. 
Washington.— Total  taxes,  $15,549.93  made  up  as  follows:     On  premiums,  less  dividends 

@  2'/f,  $15,129.22;   State  license  $10;   State  fees  $85;   Agents'  licenses,  State  $280; 

Personal  property  tax  $45.71. 
West    Virginia.— Total    taxes,    $7,441.49    made    up    as    follows:      On    premiums    @    2% 

$7,026.20;   State  license  $10;    State  fees  $20.75;   Agents'  licenses.  State  $270,  Local 

$30.50;  Local  premium  tax  $84.04. 
Wisconsin.— Total  taxes,  $10,287.96  made  up  as  follows:     On  premiums  less  annual  divi- 
dends @  1%,  $10,150.96;  State  fees  $25;  Agents'  licenses.  State  $112. 
Wyoming.— Total  taxes,  $4,315.77  made  up  as  follows:     On  premiums  @  2W/(.,  $4,248.47; 

State  license  $25;  State  fees  $15.30;  Agents'  licenses  $27. 
Porto  Rico,  Hawaii,  Philippines  and  Alaska.— Total  taxes,  $6,145.81. 
United  States.— Corporation  Excise  tax  V/,  of  net  income,  $106,411.02. 
Foreign  Countries.— Total  taxes,  $144,928.67. 
Total  Taxes,  licenses  and  fees,  all  countries.  $1,073,962.79. 


FKO.M    rilK    LAWS  OF   NFW  VOKK 


Insurance  Laiv. 

§  6.     Fees. 

Every  corporation  or  person  to  whom  this  chapter  shall  be  applicable  shall  pay 
the  following  fees  to  the  superintendent,  unless  remitted  by  him.  For  filing  the  declara- 
tion and  certified  copy  of  charter  required  by  law,  thirty  dollars.  For  filing  the  annual 
report  required  by  law,  twenty  dollars.  For  each  certificate  of  authority  and  certified 
copy  thereof,  and  for  each  certificate  of  deposit,  valuation  or  compliance,  not  exceeding 
five  dollars.  For  every  copy  of  any  paper  filed  in  his  oflice,  ten  cents  per  folio;  and  for 
aflTixing  the  official  seal  on  such  copy  and  certifying  the  same,  one  dollar.  All  fees, 
perquisites  and  moneys  received  by  the  insurance  department,  or  any  officer  thereof, 
from  or  on  account  of  any  insurance  corporation,  shall  be  paid  into  the  state  treasury 
monthly. 

Source. — Former  §  6,  as  amended  by  L.  1893,  ch.  725. 

§  7.     Expenses  of  examinations. 

The  expense  of  every  examination  or  other  investigation  of  the  affairs  of  an 
insurance  corporation,  pursuant  to  the  authority  conferred  by  the  provisions  of  this 
chapter,  shall  be  borne  and  paid  by  the  corporation  so  examined,  unless  remitted  by  the 
superintendent.  • 

No  charge  shall  be  made  for  any  examination  of  an  insurance  corporation  by  the 
superintendent  or  his  deputy  personally,  or  by  one  or  more  of  the  regular  clerks  of  the 
department  except  for  necessary  traveling  and  other  actual  expenses.  All  charges  for 
making  any  examination  and  all  charges  against  an  insurance  corporation  by  an  attorney 
■or  appraiser  of  the  department  shall  be  presented  in  the  form  of  an  itemized  bill 
approved  by  the  superintendent,  audited  by  the  comptroller,  and  paid  on  his  warrant 
•drawn  in  the  usual  manner  on  the  state  treasurer,  to  the  person  making  the  examination. 

The  corporation  examined  on  receiving  a  certified  copy  of  such  bill  so  approved, 
audited  and  paid,  shall  repay  the  amount  thereof  to  the  superintendent  of  insurance, 
to  be  by  him  paid  into  the  state  treasury  to  replace  the  money  drawn  out  as  above 
provided.  No  insurance  corporation,  or  any  officer  or  director  thereof,  shall  either 
directly  or  indirectly  pay  by  way  of  gift,  credit  or  otherwise,  any  sum  of  money  or  other 
valuable  thing  to  the  superintendent  or  any  clerk  or  employe  of  the  insurance  depart- 
ment or  any  examiner  for  extra  service  or  for  purposes  of  legislation,  or  by  way  of  a  loan, 
or  on  any  other  pretense  whatsoever. 

Source.— Former  §  7,  as  amended  by  L.  1898,  ch.  171;  L.  1906,  ch.  326,  and  L.  1909, 
ch.  301.    Amended  by  L.  1910,  ch.  634. 

§  16.     Investment  of  capital  and  surplus. 

The  cash  capital  of  every  domestic  insurance  corporation  required  to  have  a 
capital,  to  the  extent  of  the  minimum  capital  required  by  law,  shall  be  invested  and 
kept  invested  in  the  stocks  or  bonds  of  the  United  States  or  of  this  state,  not  estimated 
above  their  current  market  value,  or  in  the  bonds  of  a  county  or  incorporated  city  in 
this  state  authorized  to  be  issued  Ijy  the  legislature,  not  estimated  above  their  par  value 
or  their  current  market  value,  or  in  bonds  and  mortgages  on  improved  unencumbered 
real  property  in  this  state  worth  fifty  per  centum  more  than  the  amount  loaned  thereon. 

*  *  *  The  residue  of  the  capital  and  the  surplus  money  and  funds  of  every 
domestic  insurance  corporation  over  and  above  its  capital,  and  the  deposit  that  it  may 
be  required  to  make  with  the  superintendent,  may  be  invested  in  or  loaned  on  the 
pledge  of  any  of  the  securities  in  which  deposits  are  required  to  be  invested  or  in  the 
public  stocks  or  bonds  of  any  one  of  the  United  States,  or  in  bonds  and  mortgages 
on  improved  unencumbered  real  property  in  this  state  worth  fifty  per  centum  more  than 
the  amount  loaned  thereon,  or  except  as  in  this  chapter  otherwise  provided,  in  the 
stocks,  bonds  or  other  evidence  of  indebtedness  of  any  solvent  institution  incorporated 
under  the  laws  of  the.  United  States  or  of  any  state  thereof,  or  in  such  real  estate  as 
it  is  authorized  by  this  chapter  to  hold;  but  no  such  funds  shall  be  invested  in  or  loaned 
on  its  own  stock  or  the  stock  of  any  other  insurance  corporation  carrying  on  the  same  kind 
of  insurance  business.  Any  domestic  insurance  corporation  may,  by  the  direction  and 
consent  of  two-thirds  of  its  board  of  directors,  managers  or  finance  committee,  invest, 
by  loan  or  otherwise,  any  such  surplus  moneys  or  funds  in  the  bonds  issued  by  any  city, 
county,  town,  village  or  school  district  of  this  state,  pursuant  to  any  law  of  this  state. 

*  *  *  Every  such  domestic  corporation  doing  business  in  other  states  of  the 
United  States  or  in  foreign  countries,  may  invest  the  funds  required  to  meet  its  obliga- 


116  Studies  in  Practical  Life  Insurance 

tion  incurred  in  such  other  states  or  foreign  countries  and  in  conformity  to  the  laws 
thereof,  in  the  same  kind  of  securities  in  such  other  states  or  foreign  countries  that  such 
corporation  is  by  law  allowed  to  invest  in,  in  this  state.  Any  life  insurance  company 
may  lend  a  sum  not  exceeding  the  lawful  reserve  which  it  holds  upon  any  policy,  on 
the  pledge  to  it  of  such  policy  and  its  accumulations  as  collateral  security.  But  nothing 
in  this  section  shall  be  held  to  authorize  one  insurance  corporation  to  obtain,  by  purchase 
or  otherwise,  the  control  of  any  other  insurance  corporation. 

Source.— Former  S  16,  as  amended  by  L.  1893,  chap.  112;  L.  1895,  chap.  917;  L.  1897, 
chap.  218;  L.  1906,  chap.  326;  L.  1907,  chap.  239;  L.  1909,  chap.  240  and  chap.  302. 
Amended  by  L.  1910,  chap.  634. 

S   18.     Stocks,  bonds  and  other  evidences  of  debt. 

If  any  domestic  insurance  corporation  shall  have  invested  any  of  its  funds  in  or 
loaned  any  of  its  funds  upon  the  stock,  bonds  or  other  evidences  of  debt  of  other  cor- 
porations or  of  any  nation,  state,  county,  city,  town,  village,  school  district,  municipality, 
or  other  civil  division  of  any  state,  pursuant  to  the  laws  of  this  state,  and  the  super- 
intendent shall  have  reason  to  believe  that  such  stock,  bonds  or  other  evidences  of 
debt  are  not  amply  secured  or  are  not  yielding  an  income  he  may  direct  it  to  report 
to  him  under  oath  the  amount  thereof,  the  security  therefor  and  its  market  value.  No 
stock  and  no  bond  or  other  evidence  of  debt  if  in  default  as  to  principal  or  interest, 
or  if  not  amply  secured,  shall  be  valued  as  an  asset  of  the  corporation  above  its  market 
value.  All  bonds  or  other  evidences  of  debt  held  by  any  life  insurance  corporation 
authorized  to  do  business  in  this  state  shall,  if  amply  secured  and  if  not  in  default  as 
to  principal  or  interest,  be  valued  as  follows:  If  purchased  at  par,  at  the  par  value; 
if  purchased  above  or  below  par,  on  the  basis  of  the  purchase  price  adjusted  so  as  to 
bring  the  value  to  par  at  maturity  and  so  as  to  yield  meantime  the  effective  rate  of 
interest  at  which  the  purchase  was  made;  provided  that  the  purchase  prito  shall  in 
no  case  be  taken  at  a  higher  figure  than  the  actual  market  value  at  the  time  of  purchase, 
and  provided  further  that  the  superintendent  of  insurance  shall  have  full  discretion 
in  determining  the  method  of  calculating  values  according  to  the  foregoing  rule,  and  the 
values  found  by  him  in  accordance  with  such  method  shall  be  final  and  binding; 
provided,  also,  that  any  such  corporation  may  return  such  bonds  or  other  evidences  cf 
debt  at  their  market  value  or  their  book  value,  but  in  no  event  at  an  aggregate  value 
exceeding  the  aggregate  of  the  values  calculated  according  to  the  foregoing  rule.  The 
superintendent  of  insurance  may,  at  any  time,  in  his  discretion,  require  any  insurance 
corporation,  other  than  a  life  insurance  corporation,  authorized  to  do  business  in  this 
state  to  value  its  bonds  or  other  evidences  of  debt  in  accordance  with  the  foregoing  rule. 

Source.— Former  §  18,  as  amended  by  L.  1909,  chap.  301.  Amended  by  L.  1910, 
chap.  634. 

§  20.     Restrictions  as  to  real  property. 

Every  insurance  corporation  transacting  business  in  this  state  may  purchase, 
hold  and  convey  real  property  only  for  the  following  purposes  and  in  the  following 
manner: 

1.  The  building  in  which  it  has  its  principal  office  and  the  land  upon  which  it 
stands. 

2.  Such  as  shall  be  requisite  for  its  convenient  accommodation  in  the  transaction 
of  its  business. 

3.  Such  as  shall  have  been  acquired  for  the  accommodation  of  its  business. 

4.  Such  as  shall  have  been  mortgaged  to  it  in  good  faith  by  way  of  security  for 
loans  previously  contracted  or  for  moneys  due. 

5.  Such  as  shall  have  been  conveyed  to  it  in  satisfaction  of  debts  previously  con- 
tracted in  the  course  of  its  dealings. 

6.  Such  as  shall  have  been  purchased  at  sales  upon  judgments,  decrees  or  mort- 
gages obtained  or  made  for  such  debts. 

7.  Such  as  shall  have  been  acquired  under  sections  thirteen  and  fourteen  of  the 
general  corporation  law. 

All  such  real  property  specified  in  subdivisions  three,  four,  five,  six  and  seven  of 
this  section,  as  shall  not  be  necessary  for  its  accommodation  in  the  convenient  trans- 
action of  its  business,  shall  be  sold  and  disposed  of  within  five  years  after  it  shall  have 
acquired  title  to  the  same,  or  within  five  years  after  the  same  i^hal!  have  (oattd  to  be 
necessary  for  the  accommodation  of  its  business,  and  it  shall  not  hold  such  property 
for  a  longer  period  unless  it  shall  procure  a  certificate  from  the  superintendent  of 
insurance  that  its  interests  will  suffer  materially  by  the  forced  sale  thereof,  in  which 
event  the  time  for  the  same  may  be  extended  to  such  time  as  the  superintendent  shall 
direct  in  such  certificate. 
*********** 

No  real  property  shall  be  acquired  by  any  domestic  life  insurance  corporation 
under  subdivisions  one  or  two  hereof  or  under  section  fourteen  of  the  general  corpora- 


Sfu(Ues  in  Practical  Life  Insurance  117 

tion  law  and  no  real  property  within  the  state  shall  be  acquired  by  any  foreign  life 
insurance  corporation  under  subdivision  two  hereof,  except  with  the  approval  of  the 
superintendent  of  insurance.  No  real  property  shall  be  disposed  of  by  any  domestic 
life  insurance  corporation  and  no  real  property  within  the  state  shall  be  disposed  of 
by  any  foreign  life  insurance  corporation,  by  exchange  for  other  real  property,  wherever 
situated,  as  the  consideration  for  the  transfer  in  whole  or  part  unless  the  acquisition  of 
the  latter  shall  be  requisite  for  the  convenient  accommodation  of  the  corporation  in  the 
transaction  of  its  business  and  shall  be  approved  by  the  superintendent. 
Source. — Former  §   20,  as  amended  by  L.  IDOd,  chap.  326. 

§  36.     Officers  and  directors  not  to  be  pecuniarily  interested  in  transactions. 

No  director  or  officer  of  an  insurance  corporation  doing  business  in  this  state  shall 
receive  any  money  or  valuable  thing  for  negotiating,  procuring,  recommending  or  aiding 
in,  any  purchase  by  or  sale  of  such  corporation  of  any  property,  or  any  loan  from  such 
corporation,  nor  be  pecuniarily  interested,  either  as  principal,  coprincipal,  agent,  or 
beneficiary,  in  any  such  purchase,  sale  or  loan;  provided  that  nothing  herein  contained 
shall  prevent  a  life  insurance  corporation  from  making  a  loan  upon  a  policy  held  therein 
by  the  borrower  not  in  excess  of  the  net  value  thereof. 

Any  person  violating  any  provision  of  this  section  shall  be  guilty  of  a  misde- 
meanor. 

Source.— Former  S  36  as  amended  by  L.  1906,  chap.  326. 

S   39.     Examiners  and  examinations. 

The  Superintendent  of  insurance  shall,  as  often  as  he  deems  it  expedient,  and,  if 
a  domestic  life  insurance  corporation,  at  least  once  in  three  years,  or,  if  any  other 
domestic  insurance  corporation,  association,  society  or  order,  at  least  once  in  five  years, 
examine  into  the  affairs  of  any  insurance  corporation  doing  business  in  this  state,  and 
into  the  affairs  of  any  corporation  organized  under  any  law  of  this  state  or  having  an 
office  in  this  state,  which  corporation  is  engaged  in  or  is  claiming  or  advertising  that 
it  is  engaged  in  organizing  or  receiving  subscriptions  for  or  disposing  of  stock  of,  or  in 
any  manner  aiding  or  taking  part  in  the  formation  or  business  of,  an  insurance  corpora- 
tion or  corporations,  or  which  is  holding  the  capital  stock  of  one  or  more  insurance 
corporations  for  the  purpose  of  controlling  the  management  thereof  as  voting  trustee 
or  etherwise.  For  such  purpose  he  may  appoint  as  examiners  one  or  more  competent 
persons  not  officers  of  or  connected  with  or  interested  in  any  insurance  corporation  other 
than  as  policy  holders;  and  upon  such  examination  he,  his  deputy  or  any  examiner 
authorized  by  him  may  examine  under  oath  the  officers  and  agents  of  such  corporation 
and  all  persons  deemed  to  have  material  information  regarding  the  company's  property 
or  business.  Every  such  corporation,  its  officers  and  agents,  shall  produce  its  books 
and  all  papers  in  its  or  their  possession  relating  to  its  business  or  affairs,  and  any  other 
person  may  be  required  to  produce  any  book  or  paper  in  his  custody  deemed  to  be 
relevant  to  the  examination,  for  the  inspection  of  the  superintendent,  his  deputies  or 
examiners  whenever  required;  and  the  officers  and  agents  of  such  corporation  shall 
facilitate  such  examination  and  aid  the  examiners  in  making  the  same  so  far  as 
it  is  in  their  power  to  do  so.  Every  such  examiner  shall  make  a  full  and  true  report 
of  every  examination  made  by  him,  verified  by  his  oath,  which  shall  comprise  only  facts 
appearing  upon  the  books,  papers,  records  or  documents  of  such  corporation,  or  ascer- 
tained from  the  testimony,  sworn  to,  of  its  officers  or  agents  or  other  persons  examined 
under  oath  concerning  its  affairs,  and  such  conclusions  and  recommendations  as  may 
reasonably  be  warranted  from  such  facts  so  disclosed,  and  said  report  so  verified  shall 
be  presumptive  evidence  in  any  action  or  proceeding  in  the  name  of  the  people  against 
the  corporation,  its  officers  or  agents,  of  the  facts  stated  therein.  The  superintendent 
shall  grant  a  hearing  to  the  corporation  examined  before  filing  any  such  report;  and  may 
withhold  any  such  report  from  public  inspection  for  such  time  as  he  may  deem  proper 
and  may,  if  he  deems  it  for  the  interest  of  the  public  to  do  so,  publish  any  such  report  or 
the  result  of  any  such  examination  as  contained  therein,  in  one  or  more  newspapers 
of  the  state. 

Source.— Former  §  39,  as  amended  by  L.  1906,  chap.  326.  Amended  by  L.  1910, 
chap.  634. 

§  44.     Reports  of  corporations. 

Every  corporation,  engaged  wholly  or  in  part  in  the  transaction  of  the  business  of 
insurance  in  this  state,  whether  heretofore  or  hereafter  incorporated  by  a  general  or 
special  law,  shall  annually,  on  the  first  day  of  January,  or  within  two  months  thereafter, 
if  a  corporation  under  article  two  of  this  chapter,  and  on  or  before  the  fifteenth  day  of 
February,  if  a  corporation  under  the  other  articles  of  this  chapter,  file  in  the  office  of  the 
superintendent  of  insurance  a  statement  verified  by  the  oath  of  at  least  two  of  the 
principal  officers  of  such  corporation,  showing  its  condition  on  the  thirty-first  day  of 
December  then   next   preceding  which   shall   be   in   such   form   and    shall   contain   such 


118  Studies  in  Practical  Life  Insurance 

matters  as  the  superintendent  shall  prescribe.  If  a  foreign  corporation  incorporated 
under  the  laws  of  a  state  or  country  outside  of  the  United  States  such  oath  may  be 
made  by  the  manager  thereof  within  the  United  States. 

The  superintendent  may  also  address  any  inquiries  to  any  such  insurance  corpora- 
tion or  its  officers  in  relation  to  its  doings  or  condition,  or  any  other  matter  connected 
with  its  transactions.  Every  corporation  so  addressed  shall  promptly  and  truthfully 
reply  in  writing  to  any  such  inquiries,  and  such  reply  shall  be  verified,  if  required  by  the 
superintendent,  by  such  officer  of  the  corporation  as  he  shall  designate. 

Source.— Former  §  44,  as  amended  by  L.  1897,  chap.  493.  Amended  by  L.  1910, 
chap.  634. 

§   45.     Forms  of  report  to  be  furnished  by  superintendent. 

The  superintendent  shall  cause  to  be  prepared  and  furnished  to  every  corporation 
required  by  the  provisions  of  this  chapter  to  report  to  him,  printed  forms  of  the  reports 
and  statements  required  of  such  corporations.  He  may  make  such  changes  from  time 
to  time  in  the  form  of  the  same  as  shall  seem  to  him  best  adapted  to  elicit  from  such 
corporations  a  true  exhibit  of  their  condition  in  respect  to  the  several  matters  which  they 
are  required  to  report,  or  in  respect  to  any  other  matters  which  he  may  deem 
material.         *         *         * 

*  *  *  In  addition  to  any  other  penalty  prescribed  by  law,  every  insurance 
corporation  failing  to  make  and  file  the  reports  and  statements  required  by  this  chapter 
or  to  reply  to  any  inquiry  of  the  superintendent,  shall  forfeit  to  the  people  of  the  state 
five  hundred  dollars  for  the  first  offense,  and  an  additional  five  hundred  dollars  for 
every  month  that  such  corporation  shall  thereafter  continue  to  transact  any  business  of 
insurance  in  this  state. 

Source. — Former  §  46,  as  amended  by  L.  1906,  chap,  326. 

S  50.     Agent's  certificate  of  authority.     (See  also  §  91.) 

No  person  or  corporation  shall  act  as  agent  for  any  foreign  insurance  corporation 
In  the  transaction  of  any  business  of  insurance  within  this  state,  or  negotiate  for  or  place 
risks  for  any  such  corporation,  or  in  any  way  or  manner  aid  such  corporation  in  effecting 
insurances  or  otherwise  in  this  state,  unless  such  corporation  shall  have  fully  complied 
with  the  provisions  of  this  chapter.  Every  such  agent  shall,  annually,  on  the  first  day  of 
January,  or  within  six  months  thereafter,  procure  a  certificate  of  authority  from  the 
superintendent  of  insurance,  who  shall  file  in  his  office  evidence  of  the  issuance  of  such 
certificate  to  the  agent  aforesaid.  Any  person  or  corporation  violating  the  provisions 
of  this  section  shall  forfeit  to  the  people  of  the  state  the  sum  of  five  hundred  dollars  for 
the  first  offense,  and  an  additional  sum  of  one  hundred  dollars  for  each  month  during 
which  any  such  person  or  corporation  shall  continue  to  act  in  violation  of  this  section. 
This  section  shall  not  apply  to  the  agents  of  corporations  transacting  business  under 
the  provisions  of  article  six  [relating  to  life  or  casualty  corporations  upon  the  coopera- 
tive or  assessment  plan]  of  this  chapter. 

Source.— Former  §  50,  as  amended  by  L.  1893,  chap.  725,  and  L.  1909,  chap.  301. 

S  53.     General  penalties. 

Any  corporation  or  person  violating  any  provision  of  this  chapter,  except  where 
such  violation  constitutes  a  felony,  shall  in  addition  to  any  penalty  otherwise  prescribed 
for  such  violation,  be  guilty  of  a  misdemeanor. 

Source.- Former  §  53,  as  amended  by  L.  1906,  chap.  326. 

§  58.  Policy  to  contain  the  entire  contract;  statements  of  insured  to  be  representa- 
tions and  not  warranties. 

Every  policy  of  insurance  issued  or  delivered  within  the  state  on  or  after  the 
first  day  of  January,  nineteen  hundred  and  seven,  by  any  life  insurance  corporation 
doing  business  within  the  state  shall  contain  the  entire  contract  between  the  parties  and 
nothing  shall  be  incorporated  therein  by  reference  to  any  constitution,  by-laws,  rules, 
application  or  other  writings  unless  the  same  are  endorsed  upon  or  attached  to  the 
policy  when  issued;  and  all  statements  purporting  to  be  made  by  the  insured  shall  in 
the  absence  of  fraud  be  deemed  representations  and  not  warranties.  Any  waiver  of  the 
provisions  of  this  section  shall  be  void. 

Source. — Former  §  58. 

§   59.     Certain  provisions  in   policies  prohibited. 

No  corporation  issuing  policies  of  insurance  upon  the  lives  of  persons,  whether 
such  corporation  is  a  domestic  one,  existing  under  the  laws  of  the  state,  or  a  foreign 
one  which  has  become  entitled  to  do  business  within  the  state,  shall  provide  in  amy 
application,  policy  or  certificate  of  insurance,  that  the  person  soliciting  such  insurance, 
or  any  person  who  is  engaged  in  the  business  of  soliciting  insurance  for  the  company 
issuing  such  policy,  or  certificate,  and  whose  compensation  is  either  paid  by  said  com- 


studies  in  Practical  Life  Insurance  119 

pany,  or  is  contingent  upon  the  issuing  of  such  policy,  is  the  agent  of  the  person  insured 
under  said  policy  or  certificate,  or  shall  insert  in  said  policy  or  certificate  any  provision 
to  make  the  acts  or  representations  of  such  person  binding  upon  the  person  so  insured 
under  said  policy  or  certificate. 

Source. — Former  §  59,  as  amended  by  L.  1906,  chap.  320. 

S   GO.     Estimates  and  misrepresentations  prohibited. 

Xo  life  insurance  corporation  doing  business  in  this  state  and  no  ofiicer,  director 
or  agent  thereof  shall  issue  or  circulate,  or  cause  or  i)erniit  to  be  issued  or  circulated, 
any  estimate,  illustration,  circular  or  statement  of  any  sort  misrepresenting  the  terms 
of  any  policy  issued  by  it  or  the  benefits  or  advantages  promised  thereby,  or  the  divi- 
dends or  share  of  surplus  to  be  received  thereon,  or  shall  use  any  nam.e  or  title  of  any 
policy  or  class  of  policies  misrepresenting  the  true  nature  thereof.  Nor  shall  any  such 
corporation  or  agent  thereof  make  any  misrepresentation  to  any  i.erson  insured  in 
another  company  for  the  purpose  of  inducing  or  tending  to  induce  such  person  to  lapse, 
forfeit,  or  surrender  his  said  insurance.  Any  violation  of  this  section  shall  constitute 
a  misdemeanor,  and  it  shall  be  the  duty  of  the  superintendent  of  insurance  to  revoke 
the  license  of  the  corporation  or  agent  so  offending. 

Source. — Former  S   60,  as  amended  by  L.  1908,  chap.  347. 

§  83.     Distribution  of  surplus  to  policy-holders. 

Except  as  heroin  provided,  every  domestic  life  insurance  corporation  heretofore 
or  hereafter  organized,  whether  incorporated  by  special  act  or  under  a  general  statute, 
anything  in  its  charter  or  certificate  of  incorporation  or  in  such  special  act  or  general 
statute  to  the  contrary  notwithstanding,  shall  provide  in  every  policy  issued  on  or  after 
the  first  day  of  January,  nineteen  hundred  and  seven,  that  the  proportion  of  the  surplus 
accruing  upon  said  policy  shall  be  ascertained  and  distributed  annually  and  not  other- 
wise. Upon  the  thirty-first  day  of  December  of  each  year,  or  as  soon  thereafter  as  msy 
be  practicable,  every  such  corporation  shall  well  and  truly  ascertain  the  surplus  earned 
by  such  corporation  during  said  year.  After  setting  aside  from  such  surplus  such  sums 
as  may  te  required  for  the  payment  of  authorized  dividends  upon  the  capital  stock,  if 
any,  and  such  sums  as  may  properly  be  held  for  account  of  existing  deferred  dividend 
policies,  and  for  a  contingency  reserve  not  in  excess  of  the  amount  prescribed  in  this 
article,  every  such  corporation  shall  apportion  the  remaining  surplus  equitably  to 
all  other  .policies  entitled  to  share  therein.  Except  in  the  case  of  a  term  or  an  industrial 
policy,  the  share  of  surplus  £o  apportioned  in  the  case  of  a  policy  issued  on  or  after 
the  first  day  of  .January,  nineteen  hundred  and  seven  shall,  at  the  option  of  the  owner  of 
the  policy,  be  payable  in  cash,  or  shall  be  applicable  to  the  payment  of  any  premium 
or  premiums  upon  said  policy  or  to  the  purchase  of  a  paid-up  addition  thereto  or  shall 
be  permitted  to  accumulate  to  the  credit  of  the  policy  at  such  rate  of  interest  as  shall 
be  allowed  by  the  company,  snd  with  such  interest  shall  be  payaj^le  upon  the  maturity 
of  the  policy  or  shall  be  withdrawable  in  cash  by  the  owner  of  the  policy  on  any  anni- 
versary of  the  date  of  issue  thereof.  Such  corporation  may  require  the  owner  of  the 
policy  to  elect  the  manner  in  which  said  dividends  shall  be  applied  as  above  provided 
by  mailing  a  written  notice  of  the  am.ount  of  the  said  dividends  and  the  options 
available  as  aforesaid  in  a  sealed  envelope  in  the  manner  required  by  the  provisions 
cf  this  chapter  for  notices  of  premium  payments,  and  in  case  the  owner  shall  fail  to 
notify  the  comi:any  in  writing  cf  his  election  within  three  months  after  the  date  of 
the  mailing  of  said  notice,  the  surplus  shall  be  applied  by  the  company  to  the  purchase 
of  a  paid-up  ac^dition  to  the  sum  insured.  In  the  case  of  a  term  or  industrial  policy 
issued  on  or  after  the  first  day  of  January,  nineteen  hundred  and  seven  the  share  of 
surplus  so  apportioned  shall  be  payable  to  the  owner  of  the  policy  in  cash  or  shall 
be  applicable  to  the  payment  of  any  prem.ium  or  premiums  upon  said  policy,  or  if  so 
provided  in  the  policy  shall  be  permitted  to  accumulate  to  the  credit  of  the  policy  at 
such  rate  cf  interest  as  shall  te  allowed  ty  the  company  and  in  such  case  shall  be 
payable  upon  the  maturity  or  expiration  of  the  policy  or  shall  be  withdrawable  in  cash 
by  the  holder  of  the  policy  on  any  anniversary  of  the  date  of  issue  thereof.  The  divi- 
dends declared  as  aforesaid  in  the  case  cf  a  policy  issued  on  or  after  the  first  day  of 
January,  nineteen  hundred  and  seven,  shall  be  payable  respectively  either  upon  the 
anniversary  cf  the  policy  next  after  said  thirty-first  day  of  December  or  upon  a 
day  certain  in  the  year  following  said  date,  according  to  the  rules  of  the  corporation 
or  the  terms  of  the  policy,  and  upon  the  sole  condition  that  the  premium  payments 
for  the  policy  year  current  upon  said  thirty-first  day  cf  December  shall  have  been 
completed. 

This  section  shall  not  apply  to  any  stock  life  insurance  corporation  which  on  or 
after  the  first  day  cf  January,  nineteen  hundred  and  seven,  shall  transact  and  shall 
represent  itself  as  transacting  its  business  exclusively  upon  a  uonmutual  basis  and  shall 
after  said  date  issue  only  nonparticipating  policies.  Nor  shall  this  section  apply  to 
paid-up  or  temporary  and  pure  endowment  insurance  issued  or  granted  in  exchange 
for  lapsed  or  surrendered   policies.     A  foreign  life  insurance  corporation   which   shall 


120  Studies  in  Practical  Life  Insurance 

not  provide  in  every  participating  policy  issued  or  delivered  in  this  state  on  or  after 
the  first  day  of  January,  nineteen  hundred  and  seven,  that  the  proportion  of  the  surplus 
accruing  upon  said  policy  shall  be  ascertained  and  distributed  annually  and  not  other- 
wise, and  which  shall  not  ascertain  and  distribute  the  surplus  accruing  upon  said 
policies  annually  either  by  providing  for  their  payment  in  cash  or  their  application 
to  the  payment  of  premiums  or  to  the  purchase  of  paid-up  additions  or  for  their  accu- 
mulation as  above  provided  in  the  case  of  domestic  corporations  shall  not  be  permitted 
to  do  business  within  this  state. 

Source. — Former  §  83,  as  amended  by  L.  1906,  chap.  326. 

§   84.     Valuation  of  policies. 

The  superintendent  of  insurance  shall  annually  make  valuations  of  all  outstanding 
policies,  additions  thereto,  unpaid  dividends,  and  all  other  obligations  of  every  life 
insurance  corporation  doing  business  in  this  state.  All  valuations  made  by  him  or  by 
his  authority  shall  be  made  upon  the  net  premium  basis.  The  legal  minimum  standard 
for  contracts  issued  before  the  first  day  of  January,  nineteen  hundred  and  one,  shall 
be  the  actuaries'  or  combined  experience  table  of  mortality  with  interest  at  four  per 
centum  per  annum,  and  for  contracts  issued  on  or  after  said  day  shall  be  the  American 
experience  table  of  mortality  with  interest  at  three  and  one-half  per  centum  per  annum; 
provided  that  the  legal  minimum  valuation  of  all  contracts  issued  on  or  after  the  first 
day  of  January,  nineteen  hundred  and  seven,  shall  be  in  accordance  with  the  select  and 
ultimate  method,  and  on  the  basis  that  the  rate  of  mortality  during  the  first  five  years 
after  the  issuance  of  said  contracts  respectively  shall  be  calculated  according  to  the 
following  percentages  of  the  rates  shown  by  the  American  experience  table  of  mortality, 
to  wit,  first  insurance  year  fifty  per  centum  thereof,  second  insurance  year  sixty-five 
per  centum  thereof,  third  insurance  year  seventy-five  per  centum  thereof,  fourth  insur- 
ance year  eighty-five  per  centum  therof,  and  fifth  insurance  year  ninety-five  per  centum 
thereof.  The  superintendent  may  vary  the  standards  of  interest  and  mortality  in  the 
case  of  corporations  from  foreign  countries  as  to  contracts  issued  by  such  corporations 
in  other  countries  than  the  United  States;  and  in  particular  cases  of  invalid  lives  and 
other  extra  hazards,  and  value  policies  in  groups,  use  approximate  averages  for  fractions 
of  a  year  and  otherwise,  and  accept  the  valuation  of  the  department  of  insurance  of  any 
other  state  or  country  if  made  upon  the  basis  and  according  to  the  standards  herein 
required  in  place  of  the  valuation  herein  required  if  the  insurance  officer  of  such  state 
or  country  accepts  as  sufficient  and  valid  for  all  purposes  the  certificate  of  valuation 
of  the  superintendent  of  insurance  of  this  state.  No  policy  issued  after  the  thirty-first 
day  of  December,  nineteen  hundred  and  six,  shall  be  valued  as  term  insurance  unless 
premiums  are  based  upon  net  term  rates;  and  no  policy  with  level  premiums  issued 
after  said  date  shall  be  valued  as  term  insurance  for  the  first  policy  year.  The  legal 
minimum  standard  for  the  valuation  of  annuities  issued  after  January  first,  nineteen 
hundred  and  seven,  shall  be  McClintock's  "Tables  of  Mortality  among  Annuitants"  with 
interest  at  three  and  one-half  per  centum  per  annum,  but  annuities  deferred  ten  or  more 
years  and  written  in  connection  with  life  or  term  insurances  shall  be  valued  on  the 
same  mortality  table  from  which  the  consideration  or  premiums  were  computed,  with 
interest  not  higher  than  three  and  one-half  per  centum  per  annum.  The  legal  minimum 
standard  for  the  valuation  of  industrial  policies  issued  after  the  first  day  of  January, 
nineteen  hundred  and  seven,  shall  be  the  American  experience  table  of  mortality  with 
interest  at  three  and  one-half  per  centum  per  annum,  provided,  that  any  life  insurance 
corporation  may  voluntarily  value  its  industrial  policies  written  on  the  weekly  premium 
payment  plan  according  to  the  standard  industrial  mortality  table  or  the  substandard 
industrial  mortality  table.  Any  life  insurance  corporation  may  voluntarily  value  its 
policies,  or  any  class  thereof,  according  to  the  American  experience  table  of  mortality, 
or  if  industrial,  at  its  option,  according  to  the  standard  industrial  mortality  table  or  sub- 
standard industrial  mortality  table,  at  a  lower  rate  of  interest  than  that  above  prescribed, 
but  not  lower  than  three  per  centum  per  annum,  and  with  or  without  reference  to  the 
select  and  ultimate  method  of  valuation,  and  in  every  such  case  shall  report  any  excess 
of  its  valuations  over  those  computed  by  the  said  legal  minimum  standard  and  also 
the  standards  used  by  it  in  making  the  same  to  the  superintendent  of  insurance  in 
its  annual  statement,  provided  that  no  such  standards  if  adopted  shall  be  abandoned 
without  the  consent  of  the  superintendent  of  insurance  first  obtained  in  writing. 
Source— Former  S  84,  as  amended  by  L.  1893,  chap.  147;  L.  1901,  chap.  346;  L.  1906, 
chap.  326,  and  L.  1909,  chap.  301.    Amended  by  L.  1910,  chap.  616. 

§  87.     Contingency  reserve. 

Any  domestic  life  insurance  corporation  may  accumulate  and  maintain  in  addition  to 
an  amount  equal  to  the  net  values  of  its  policies  computed  according  to  the  standard 
adopted  by  it  under  section  eighty-four  of  this  chapter  a  contingency  reserve  not 
exceeding  the  following  respective  percentages  of  said  net  values,  to  wit:  When  said 
net  values  are  less  than  one  hundred  thousand  dollars,  twenty  per  centum  thereof 
or  the  sum  of  ten  thousand  dollars,  whichever  is  the  greater;  when  said  net  values  are 


Sfiidies  in  Practical  Life  Insurance  121 

greater  than  cne  hundred  thousand  dollars,  the  percentage  thereof  measuring  the 
contingency  reserve  shall  decrease  one-half  of  one  per  centum  for  each  one  hundred 
thousand  dollars  of  said  net  values  up  to  one  million  dollars;  one-half  of  one  per  centum 
for  each  additional  one  million  dollars  up  to  ten  million  dollars;  one-half  of  one  per 
centum  for  each  additional  two  million  five  hundred  thousand  dollars  up  to  twenty 
million  dollars;  one-half  of  cne  per  centum  for  each  additional  five  million  dollars  up 
to  fifty  million  dollars;  one-half  of  one  per  centum  for  each  additional  twenty-five 
million  dollars  up  to  seventy-five  million  dollars;  and  if  said  net  values  equal  or  exceed 
the  last  mentioned  amount,  the  contingency  reserve  shall  not  exceed  five  per  centum 
thereof;  provided  that  as  the  net  values  of  said  policies  increase  and  the  maximum 
percentage  measuring  the  contingency  reserve  decreases  such  corporation  may  main- 
tain the  contingency  reserve  already  accumulated  hereunder,  although  for  the  time 
being  it  may  exceed  the  maximum  percentage  herein  prescribed,  but  may  not  add  to 
the  contingency  reserve  when  the  addition  will  bring  it  beyond  the  maximum  per- 
centage. Provided  however  that  nothing  herein  contained  shall  be  construed  to  aftect 
any  existing  surplus  or  contingency  reserves  held  by  any  such  corporation  save  that 
whenever  the  existing  surplus  and  contingency  reserves,  exclusive  of  said  net  values 
and  of  all  accumulations  held  on  account  of  existing  deferred  dividend  policies  or  groups 
of  such  policies,  shall  exceed  the  limit  above  mentioned  it  shall  not  be  entitled  to 
maintain  any  additional  contingency  reserve.  Provided  further  that  for  cause  shown 
the  superintendent  of  insurance  may  at  any  time  and  from  time  to  time  permit  any 
corporation  to  accumulate  and  maintain  a  contingency  reserve  in  excess  of  the  limit 
above  mentioned  for  a  prescribed  period,  not  exceeding  one  year  under  any  one  per- 
mission, by  filing  in  his  office  a  decision  stating  his  reasons  therefor  and  causing  the 
same  to  be  published  in  his  next  annual  report.  This  section  shall  not  apply  to  any 
corporation  doing  exclusively  a  non-participating  business. 
Source. — Former  S  87. 

§   88.     Surrender  value  of  lapsed  or  forfeited  policies. 

Whenever  any  policy  of  life  insurance  issued  after  January  first,  eighteen  hundred 
and  eighty,  and  before  January  first,  nineteen  hundred  and  seven,  by  any  domestic  life 
insurance  corporation  after  being  in  force  three  full  years,  shall,  by  its  terms,  lapse 
or  become  forfeited  for  the  non-payment  of  any  premium  or  any  note  given  for  a  pre- 
mium or  loan  made  in  cash  on  such  policy  as  security,  or  of  any  interest  on  such  note 
or  loan,  the  reserve  on  such  policy  computed  according  to  the  American  experience 
table  of  mortality  at  the  rate  of  four  and  one-half  per  centum  per  annum  shall,  on 
demand  made,  with  surrender  of  the  policy  within  six  months  after  such  lapse  or 
forfeiture,  be  taken  as  a  single  premium  of  life  insurance  at  the  published  rates  of  the 
corporation  at  the  time  the  policy  was  issued,  and  shall  be  applied,  as  shall  have  been 
agreed  in  the  application  or  policy,  either  to  continue  the  insurance  of  the  policy  in 
force  at  its  full  amount  so  long  as  such  single  premium  will  purchase  temporary 
insurance  for  that  amount,  at  the  age  of  the  insured  at  the  time  of  lapse  or  forfeiture, 
or  to  purchase  upon  the  same  life  at  the  same  age  paid-up  insurance  payable  at  the 
same  time  aiad  under  the  same  conditions,  except  as  to  payments  of  premiums,  as  the 
original  policy.  If  no  such  agreement  be  expressed  in  the  application  or  policy,  such 
single  premium  may  be  applied  in  either  of  the  modes  above  specified  at  the  option  of 
the  owner  of  the  policy,  notice  of  such  option  to  be  contained  in  the  demand  herein- 
before required  to  be  made  to  prevent  the  forfeiture  of  the  policy. 

The  reserve  hereinbefore  specified  shall  include  dividend  additions  calculated  at 
the  date  of  the  failure  to  make  any  of  the  payments  above  described  according  to  the 
American  experience  table  of  mortality  with  interest  at  the  rate  of  four  and  one-half 
per  centum  per  annum  after  deducting  any  indebtedness  of  the  insured  on  account  of 
any  annual  or  semi-annual  or  quarterly  premium  then  due,  and  any  loan  made  in  cash 
on  such  policy,  evidence  of  which  is  acknowledged  by  the  insured  in  writing. 

The  net  value  of  the  insurance  given  for  such  single  premium  under  this  section, 
computed  by  the  standard  of  this  state,  shall  in  no  case  be  less  than  two-thirds  of  the 
entire  reserve  computed  according  to  the  rule  prescribed  in  this  section  after  deducting 
the  indebtedness  as  specified;  but  such  insurance  shall  not  participate  in  the  profits 
of  the  corporation. 

If  the  reserve  upon  any  endowment  policy  applied  according  to  the  provisions  of 
this  section  as  a  single  premium  of  temporary  insurance  be  more  than  sufficient  to 
continue  the  insurance  to  the  end  of  the  endowment  term  named  in  the  policy,  and  if 
the  insured  survive  that  term,  the  excess  shall  be  paid  in  cash  at  the  end  of  such  term, 
on  the  conditions  on  which  the  original  policy  was  issued. 

This  section  shall  not  apply  to  any  case  of  a  policy  issued  before  January  first, 
nineteen  hundred  and  seven,  where  the  provisions  of  the  section  are  specifically 
waived  in  the  application  and  notice  of  such  waiver  is  written  or  printed  in  red  ink  on 
the  margin  of  the  face  of  the  policy  when  issued.  If  any  policy  of  life  insurance  (other 
than  a  term  policj'  for  twenty  years  or  less),  issued  on  or  after  January  first,  nineteen 
hundred  and  seven,  by  any  domestic  life  insurance  corporation,  after  being  in  force  three 


122  Studies  iu  Practical  Life  Insurance 

full  years  shall  by  its  terms  lapse  or  become  forfeited  by  the  nonpayment  of  any  premium 
or  any  note  therefor  or  any  loan  on  such  policy  or  of  any  interest  on  such  note  or  loan, 
the  reserve  on  such  policy  computed  according  to  the  standard  adopted  by  said  company 
in  accordance  with  section  eighty-four  of  this  chapter,  together  with  the  value  of  any 
dividend  additions  upon  said  policy,  after  deducting  any  indebtedness  to  the  company 
and  one-fifth  of  the  said  entire  reserve,  or  the  sum  of  two  and  fifty  one-hundredths 
dollars  for  each  one  hundred  dollars  of  the  face  of  said  policy  if  said  sum  shall  be  more 
than  the  said  cne-fifth,  shall  upon  demand  not  later  than  three  months  after  the  dale 
of  lapse  with  surrender  of  the  policy  be  applied  as  a  surrender  value  as  agreed  upon 
in  the  policy,  provided  that  if  no  other  option  expressed  in  the  policy  be  availed  cf  by  the 
owner  thereof,  and  if  the  policy  itself  dees  not  direct  what  option  shall  become 
operative  in  default  of  selection  by  the  owner,  the  same  shall  be  applied  to  continue  the 
insurance  in  force  at  its  full  amount  including  any  outstanding  dividend  additions  less 
any  outstanding  indebtedness  on  the  policy  but  without  future  participation  and  without  the 
right  to  loans,  so  long  as  such  surrender  value  will  purchase  nonparticipating  temporary 
insurance  at  net  single  premium  rates  by  the  standard  adopted  by  the  company,  at  the 
age  of  the  insured  at  the  time  of  lapse  or  forfeiture,  provided  in  case  of  any  endowment 
policy  if  the  sum  applicable  to  the  purchase  of  temporary  insurance  shall  be  more  than 
sufficient  to  continue  the  insurance  to  the  end  of  the  endowment  term  named  in  the 
policy,  the  excess  shall  be  used  to  purchase  in  the  same  manner  pure  endowment 
insurance  payable  at  the  end  of  the  endowment  term  named  in  the  policy  on  the  con- 
ditions on  which  the  original  policy  was  issued,  and  provided  further  that  any  attempted 
waiver  of  the  provisions  of  this  paragraph  in  any  application,  policy  or  otherwise,  shall 
be  void,  and  provided  further  that  any  value  allowed  in  lieu  thereof  shall  be  at  least 
equal  to  the  net  value  of  the  temporary  insurance  or  of  the  temporary  and  pure 
endowment  insurance  herein  provided  for.  The  term  of  temporary  insurance  herein 
provided  for  shall  include  the  period  of  grace,  if  any.  In  every  case  where  a  contract 
provides  for  both  insurance  and  annuities,  the  foregoing  provisions  shall  apply  only 
to  that  part  of  the  contract  which  provides  for  insurance,  but  every  such  contract  con- 
taining a  provision  for  a  deferred  annuity  on  the  life  of  the  insured  only  (unless  paid 
for  by  a  single  premium)  shall  provide  that  in  the  event  of  the  nonpayment  of  any 
premium  after  three  full  years'  premiums  shall  have  been  paid,  the  annuity  shall 
automatically  become  converted  into  a  paid-up  annuity  for  such  a  proportion  of  the 
original  annuity  as  the  number  of  completed  years'  premiums  paid  bears  to  the  total 
number  of  premiums  required  under  the  contract. 

Source.— Former  §  88,  as  amended  by  L.  1906,  chap.  326,  and  L.  1909,  chap.  301. 
Amended  by  chap.  595  of  1909  and  chap.  614  of  1910. 

§  89.     Discriminations  prohibited. 

No  life  insurance  corporation  doing  business  in  this  state  shall  make  or  permit 
any  discrimination  between  individuals  of  the  same  class  or  of  equal  expectation  cf 
life,  in  the  amount  or  payment  or  return  of  premiums  or  rates  charged  for  policies  of 
insurance,  or  in  the  dividends  or  other  benefits  payable  thereon,  or  in  any  of  the  terms 
and  conditions  cf  the  policy;  nor  shall  any  such  company  permit  or  agent  thereof  offer 
or  make  any  contract  of  insurance  or  agreement  as  to  such  contract  other  than  as 
plainly  expressed  in  the  policy  issued  thereon;  nor  shall  any  such  company  or  any 
officer,  agent,  solicitor  or  representative  thereof  pay,  allow  or  give,  or  offer  to  pay, 
allow  or  give,  directly  or  indirectly,  as  inducement  to  any  person  to  insure,  or  give,  sell 
or  purchase,  or  offer  to  give,  sell  or  purchase  as  such  inducement  cr  in  connection  with 
such  insurance,  any  stocks,  bends  or  other  securities  of  any  insurance  company  or 
otlier  ccrpcraticn,  association  cr  partnership,  or  any  dividends  or  profits  accruing 
therecn,  cr  any  valuable  consideration  or  inducement  whatever  not  specified  in  the 
policy,  ricr  shall  any  person  knowingly  receive  as  such  inducement,  any  rebate  of 
premium,  cr  any  special  favor  or  advantage  in  the  dividends  cr  other  benefits  to  accrue 
therecn,  or  any  paid  employment  or  contract  for  services  of  any  kind  cr  any  valuable 
consideration  or  inducement  whatever,  not  specified  in  the  policy.  No  person  shall  be 
excused  from  attending  and  testifying  or  producing  any  books,  papers  or  other  docu- 
ments before  any  court  or  magistrate,  ui)on  any  investigation,  proceeding  or  trial  for  a 
violation  of  any  cf  the  provisions  of  this  section,  upon  the  ground  or  for  the  reason 
that  the  testimony  or  evidence,  documentary  cr  otherwise,  required  of  him  may  tend 
to  convict  him  of  a  crime  or  subject  him  to  a  penalty  or  forfeiture;  but  no  person  shall 
be  prosecuted  or  subjected  to  any  penalty  or  forfeiture  for  or  on  account  of  any  trans- 
action, matter  or  thing  concerning  whii  h  he  may  so  testify  or  produce  evidence,  docu- 
mentary or  otherwise,  and  no  testimony  so  given  or  produced  shall  be  received  against 
him  upon  any  criminal  investigation  or  proceeding.  No  i)remium  upon  any  policy  of  life 
insurnnce  issued  on  or  after  .January  first,  nineteen  hundred  and  seven,  shall  be  charged 
for  term  insurance  for  one  year,  higher  in  amount  thnn  the  premium  for  term  insurance 
for  one  year  at  the  same  age  under  any  other  form  of  policy  issued  by  such  corporation. 

Source. — Forii-.er  S  89.  as  amen<lpd  by  L.  19()t;,  chap.  3LM!,  and  L.  1907.  chap.  729. 


studies  in  Practical  Life  Insurance  123 

§  91.  Business  to  be  accepted  from  licensed  agents  only;  agents'  certificate  of 
authority. 

No  life  insurance  corporation  doing  business  within  this  state,  or  agent  thereof, 
shall  pay  any  commission  or  other  compensation  to  any  per'^on  for  services  in  obtaining 
new  insurance,  unless  such  person  shall  have  first  procured  from  the  superintendent  of 
insurance  a  certificate  of  authority  to  act  as  an  agent  of  such  company  as  hereinafter 
provided.  No  person  shall  act  as  agent,  sub-agent  cr  broker,  in  the  solicitation  or 
procurement  of  applications  for  insurance,  or  receive  for  services  in  obtaining  new 
insurance  any  commission  or  other  compensation  from  any  life  insurance  corporation 
doing  business  in  this  state,  or  agent  thereof,  without  first  procuring  a  certificate  of 
authority  so  to  act  from  the  superintendent  of  insurance,  which  must  be  renewed 
annually  on  the  first  day  of  January,  or  within  six  months  thereafter.  Such  certificate 
shall  be  issued  by  the  superintendent  of  insurance  only  upon  the  written  application 
of  persons  desiring  such  authority,  such  application  being  approved  and  countersigned 
by  the  company  such  person  desires  to  represent,  and  shall  be  upon  a  form  approved 
by  the  superintendent  of  insurance,  giving  such  information  as  he  may  require.  The 
superintendent  of  insurance  shall  have  the  right  to  refuse  to  issue  or  renew  any  such 
certificate  in  his  discretion.  No  such  certificate  shall  be  valid,  however,  in  any  event 
after  the  first  day  of  .July- of  the  year  following  the  issuing  of  such  certificate.  Renewal 
certificates  may  be  issued  upon  the  application  of  the  company.  Such  certificate  of 
authority  shall  be  executed  in  triplicate;  one  copy  thereof  shall  be  filed  in  the  office 
of  the  superintendent,  and  two  copies  thereof  shall  be  issued  to  such  agent,  subagent 
or  broker,  one  of  which  copies  such  agent,  subagent  or  broker  shall,  within  thirty  days 
after  such  certificate  is  issued,  cause  to  be  filed  in  the  ofllce  of  the  county  clerk  of  the 
county  in  which  such  agent,  subagent  or  broker  resides,  or,  if  a  non-resident,  iji  tlie 
office  of  the  county  clerk  of  the  county  in  this  state  in  which  he  has  an  office  for  the 
transaction  of  business.  Agents  operating  solely  for  companies  transacting  industrial 
cr  prudential  insurance  on  the  weekly-payment  plan  of  insurance  are  exempted  from 
the  previsions  of  this  section,  and  nothing  contained  herein  shall  be  construed  as 
prohibiting  any  corporation  transacting  industrial  or  prudential  insurance  on  the  weekly- 
paym.ent  plan  from  accepting  business  on  the  plan  from  unlicensed  agents.  Any  person 
or  corporation  violating  the  provisions  of  this  section  shall  forfeit  to  the  state  the  sum 
of  five  hundred  dollars.  On  the  conviction  of  any  person  acting  as  agent,  subagent  or 
broker,  of  the  commission  of  any  act  which  is  a  violation  of  any  of  the  provisions  of  this 
chapter  the  superintendent  of  insurance  shall  immediately  revoke  the  certificate  of 
authority  issued  to  him  and  no  such  certificate  shall  thereafter  be  issued  to  such  con- 
victed person  by  the  superintendent  within  three  years  from  the  date  of  his  conviction. 

Source. — Former  §  91,  as  amended  bv  L.  1895,  chap.  995;  L.  1907,  chap.  623,  and 
L.  1909,  chap.  301. 

§   92.     No  forfeiture  of  policy  without  notice. 

No  life  insurance  corjjoration  doing  business  in  this  state  sliall  within  one  year 
after  the  default  in  payment  of  any  premium,  installment  or  interest  declare  forfeited, 
cr  lapsed,  any  policy  hereafter  issued  or  renewed,  and  not  issued  upon  the  payment  of 
monthly  or  weekly  premiums,  or  unless  the  same  is  a  term  insurance  contract  for  one' 
year  or  less,  nor  shall  any  such  policy  be  forfeited,  or  lapsed,  by  reason  of  nonpayment 
when  due  of  any  premium,  interest  or  installment  or  any  portion  thereof  required  by 
the  terms  of  the  policy  to  be  paid,  within  one  year  from  the  failure  to  pay  such  premium, 
interest  or  installment,  unless  a  written  or  printed  notice  stating  the  amount  of  such 
premium,  interest,  installment,  or  portion  thereof,  due  on  such  policy,  the  place  where 
it  shall  be  paid,  and  the  person  to  whom  the  same  is  payable,  shall  have  been  duly 
addressed  and  mailed  to  the  person  whose  life  is  insured,  or  the  assignee  of  the  policy, 
if  notice  of  the  assignment  has  been  given  to  the  corporation,  at  his  last  known  post- 
office  address  in  this  state,  postage  paid  by  the  corporation,  or  by  any  officer  thereof, 
or  person  appointed  by  it  to  collect  such  premium,  at  least  fifteen  and  not  more  than 
forty-five  days  prior  to  the  day  when  the  same  is  payable.  The  notice  shall  also  state 
that  unless  such  premium,  interest,  installment  or  portion  thereof,  then  due,  shall  be 
paid  to  the  corporation,  or  to  the  duly  appointed  agent  or  person  authorized  to  collect 
such  premium  by  or  before  the  day  it  falls  due,  the  policy  and  all  payments  thereon 
will  become  forfeited  and  void  except  as  to  the  right  to  a  surrender  value  or  paid-up 
I)olicy  as  in  this  chapter  provided.  If  the  payment  demanded  by  such  notice  sliall  be 
made  within  its  time  limited  therefor,  it  shall  be  taken  to  be  in  full  compliance  with 
the  requirements  of  the  policy  in  respect  to  the  time  of  such  payment;  and  no  such 
policy  shall  in  any  case  be  forfeited  or  declared  forfeited,  or  lapsed,  until  the  expiration 
of  thirty  days  after  the  mailing  of  such  notice.  The  affidavit  of  any  officer,  clerk,  or 
agent  of  the  corporation,  or  of  any  one  authorized  to  mail  such  notice  that  the  notice 
required  by  this  section,  has  been  duly  addressed  and  mailed  by  the  corporation  issuing 
such  policy  shall  be  presumptive  evidence  that  such  notice  has  been  duly  given.  No 
action  shall  be  maintained  to  recover  under  a  forfeited  policy,  unless  the  same  is  insti- 


124  Stt(dies  in  Practical  Life  Insurance 

tuted  within  two  years  from  the  day  upon  which  default  was  made  in  paying  the 
premium,  installment,  interest  or  portion  thereof  for  which  it  is  claimed  that  forfeiture 
ensued. 

Source.— Former  §  92,  as  amended  by  L.  1897,  chap.  218,  and  L.  1906,  chap.  326. 

S   94.     Election  of  directors. 

The  following  provisions  are  hereby  established  for  the  election  of  directors: 

1.  At  every  election  of  directors  in  any  domestic  mutual  life  insurance  corporation, 
whether  incorporated  by  special  act  or  under  general  law  and  anything  to  the  contrary 
in  its  charter,  certificate  of  incorporation  or  by-laws  notwithstanding,  every  policy- 
holder whose  insurance  shall  be  in  force  and  shall  have  been  in  force  for  at  least  one 
year  prior  thereto  shall  be  entitled  to  vote  without  other  qualification. 

2.  Every  such  policyholder,  and  every  other  person  having  a  right  to  vote  by 
virtue  of  any  contract  made  prior  to  the  enactment  of  this  section  which  shall  remain 
in  force  until  the  date  of  such  election,  shall  be  entitled  to  vote  in  person  or  by  proxy 
or  by  mail,  as  herein  provided. 

3.  Except  as  otherwise  now  provided  with  reference  to  existing  policies,  every 
policyholder  shall  be  entitled  to  one  vote  only  irrespective  of  the  number  of  policies 
or  the  amount  of  insurance  held  by  him;  and  unless  a  policy  shall  have  been  assigned 
more  than  six  months  prior  to  the  election  by  an  assignment  absolute  on  its  face  to  an 
assignee  other  than  the  corporation  which  shall  have  issued  the  policy  the  person  upon 
whose  application  the  policy  shall  have  been  issued,  or  if  the  application  be  signed  by 
more  than  one  person,  the  person  whose  life  is  insured  shall  be  deemed  to  be  a 
policyholder  entitled  to  vote  as  aforesaid;  in  case  a  policy  shall  have  been  assigned 
as  aforesaid,  the  assignee  shall  be  deemed  to  be  a  policyholder  entitled  to  vote,  provided 
his  signature,  either  attested  by  the  assignor  or  acknowledged  in  like  manner  as  in 
case  of  a  deed  to  be  recorded  in  this  state,  shall  have  been  filed  at  the  home  office  of  the 
corporation  which  shall  have  issued  the  policy. 

4.  At  least  six  months  prior  to  every  such  election  every  such  corporation  shall 
file  with  the  superintendent  of  insurance  two  full  and  correct  lists  of  the  names  and 
last  known  post-office  addresses  of  all  policyholders  whose  insurance  was  in  force 
twelve  months  prior  to  the  date  fixed  for  such  election,  and  all  other  policyholders 
entitled  to  vote  by  virtue  of  contracts  made  prior  to  April  twenty-seven,  nineteen 
hundred  and  six.  The  names  of  said  policyholders  shall  be  arranged  on  said  lists 
alphabetically,  placed  in  separate  volumes  containing  not  to  exceed  three  thousand 
names,  and  shall  be  classified  by  states,  territories  and  possessions  of  the  United  States 
and  by  foreign  countries.  Such  corporation  shall  also  maintain  two  similar  lists  at  its 
home  office;  and  these  lists  shall  be  corrected  from  the  records  of  the  home  office 
so  that  a  list  as  nearly  correct  as  may  be  shall  be  on  file  to  within  three  months  of 
such  an  election. 

5.  All  said  lists  shall  be  subject  to  inspection  and  copy  under  regulations  pre- 
scribed by  the  superintendent  of  insurance  at  any  time  during  business  hours  by 
any  policyholder  in  said  corporation  or  by  his  authorized  representative  during  the  six 
months   prior  to  such  election;    provided,   however,   that  after  such   election,   or,  if  no 

■candidate  shall  have  been  nominated  other  than  those  nominated  by  the  board  of 
directors,  then  after  the  time  for  such  independent  nominations  shall  have  expired, 
such  lists  m.ay  be  withdrawn  by  the  corporation  filing  and  maintaining  the  same  as 
aforesaid;  and  thereafter,  prior  to  the  next  election,  new  lists  shall  be  filed  and  main- 
tained, subject  to  inspection  and  copy,  as  above  provided,  which  may  be  similarly 
withdrawn. 

6.  Where  policyholders  of  any  domestic  stock  life  insurance  corporation  have 
become  or  shall  become  entitled  to  vote  for  directors,  they  shall  be  entitled  to  vote  in" 
person,  by  proxy  or  by  mail,  as  herein  provided  and  two  similar  lists  of  policyholders, 
qualified  to  vote,  in  accordance  with  the  charter  or  by-laws  of  such  corporation,  except 
the  holders  of  industrial  policies,  shall  be  filed  and  maintained  in  the  office  of  the 
superintendent  of  insurance  and  at  the  home  office  respectively,  similarly  arranged  and 
similarly  subject  to  inspection  and  copy  and  withdrawal  as  in  the  case  of  mutual  corpo- 
rations' as  above  provided. 

7.  Where  policyholders  in  any  company  shall  have  made  nominations  as  herein- 
after prescribed,  they,  or  a  committee  representing  them,  shall  upon  demand,  with  the 
approval  of  the  superintendent  of  insurance  and  the  payment  to  the  company  of  the 
actual  cost  of  making  such  copies,  be  furnished  by  such  company  with  a  copy  of  such 
list  of  policyliolders  or  with  a  copy  therefrom  of  the  list  for  a  separate  jurisdiction. 
A  copy  of  a  list  so  taken,  or  of  any  part  thereof,  shall  be  held  by  persons  receiving  the 
same  inviolate  for  the  purposes  of  said  nominators  in  a  pending  election  and  shall  not 
be  transferred  to  other  persons  for  any  other  use  whatever.  At  the  close  of  the  canvasts 
of  the  votes  all  copies  cf  such  lists  shall  be  returned  to  the  company. 

8.  At  least  seven  months  prior  to  the  date  of  any  election  of  directors  in  any  suet, 
corporation,  the  board  of  directors  shall  nominate  candidates  for  every  vacancy  to  be 


Studies  in  Practical  Life  Insurance  125 

filled  at  such  election  and  shall  also  appoint  three  persons,  jointly  or  severally,  to 
receive  proxies  to  be  voted  for  said  nominees,  and  shall  also  file  with  the  superintendent 
of  insurance  and  at  its  home  office  a  certificate  of  the  names  of  the  candidates  so 
nominated  and  of  the  persons  so  designated  to  receive  said  proxies  which  shall  be 
described  as  the  "administration  ticket." 

;*.  Any  one  hundred  or  more  qualified  voters  of  such  corporation  may  make  other 
nominations  for  one  or  more  vacancies  to  be  filled  at  any  such  election  by  filing  with  the 
superintendent  of  insurance  at  least  five  months  before  the  election  a  certificate  signed 
and  acknowledged,  giving  the  names  and  addresses  of  the  candidates  nominated,  the 
names  and  addresses  of  three  persons,  jointly  or  severally,  designated  to  receive  proxies 
to  be  voted  for  said  nominees,  and  an  appropriate  name  or  title  designated  by  the 
superintendent  of  insurance  to  distinguish  the  ticket  from  the  administration  ticket  and 
other  nominations.  Such  nominators  must  also  file  a  copy  of  said  certificate,  certified  by 
said  superintendent,  at  the  home  office  of  the  company  at  least  five  months  before  such 
election. 

10.  All  certificates  of  nominations  shall  be  accompanied  by  a  written  acceptance 
of  such  nomination  by  each  nominee  thereon.  A  court  of  record  may  for  cause  shown 
direct  the  name  of  any  candidate  to  be  stricken  from  a  ticket  on  file  and  may  authorize 
the  nominators  of  such  ticket  to  substitute  the  name  of  another  person  to  fill  the  vacancy 
so  made. 

11.  If  no  independent  nomination  shall  have  been  made  as  hereinbefore  provided, 
then  and  in  that  case  all  further  proceedings  in  connection  with  such  election  as 
provided  by  this  section  may  be  omitted,  and  said  election  shall  then  be  conducted  and 
held  under  such  rules  and  regulations  as  the  superintendent  of  insurance  may  prescribe; 
but  no  votes  shall  be  cast  or  counted  except  for  said  candidates  nominated  by  the  board 
of  directors,  or  for  such  candidates  as  the  board  of  directors  may  have  nominated  to 
fill  vacancies  among  said  candidates  caused  by  the  death,  disability  or  refusal  to  stand 
as  candidates  of  any  one  or  more  of  those  so  nominated. 

12.  At  least  three  months  prior  to  any  such  election  the  corporation  shall  cause 
to  be  mailed,  in  a  serially  numbered  sealed  envelope  with  postage  prepaid,  to  each 
policyholder  whose  name  shall  be  upon  said  list  and  whose  policy  shall  still  be  in  force, 
at  his  last  known  post-ofl[ice  address,  a  corresponding  serially  numbered  official  ballot 
in  a  form  approved  by  the  superintendent  of  insurance  and  containing  the  respective 
tickets  nominated  as  hereinbefore  provided  and  the  names  and  addresses  of  the  persons 
so  appointed  to  receive  proxies.  A  corresponding  serially  numbered  stub  or  card 
containing  the  name  and  address  of  the  policyholder  to  whom  each  ballot  is  sent  shall 
be  retained  at  the  home  office  of  the  company  for  the  purpose  of  identifying  said  ballot 
when  returned.  Such  official  ballot  shall  be  conveniently  arranged  under  the  names 
or  titles  by  which  the  nominations  have  been  designated  and  shall  have  printed  upon  it 
\he  name  of  the  company,  the  post-office  address  of  its  home  oflSce,  the  number  of 
airectors  to  be  elected  and  the  names  of  those  whose  terms  expire,  the  date  of  the 
election  and  instructions  as  herein  provided  for  executing  such  official  ballot  or  for  the 
use  of  a  proxy  as  herein  provided  and  a  designated  space  for  the  signature  of  the 
policyholder,  the  number  of  one  of  his  policies  and  the  signature  of  a  subscribing 
witness. 

13.  No  other  or  different  ballot  shall  be  used,  except  that  a  duplicate  ballot  or 
ballots  may  be  supplied  to  any  policyholder  and  voter  or  to  the  holder  of  his  proxy,  for 
his  own  use,  pursuant  to  rules  and  regulations  prescribed  by  the  superintendent  of 
insurance. 

14.  There  shall  be  enclosed  in  such  sealed  envelope  with  such  ofhcial  ballot  a 
suitable  returned  gummed  envelope  having  thereon  the  name  and  post-office  address  of 
the  home  office  of  the  corporation  and  the  words  "ballot  for  directors."  There  shall 
also  be  enclosed  in  such  sealed  envelope  a  suitable  blank  proxy  upon  which  shall  be 
printed  a  statement  of  the  right  of  the  policyholder  to  vote  either  by  mail  or  by  proxy  as 
Jierein  provided  or  in  person. 

15.  No  other  papers  or  written  or  printed  matter  shall  be  enclosed  in  such  sealed 
envelope.  Specimen  copies  of  such  sealed  envelope  and  enclosures  shall  be  approved 
by  the  superintendent  of  insurance  before  being  so  mailed. 

16.  A  policyholder  desiring  to  vote  by  mail  must  indicate  the  name  of  the  nominee 
or  nominees  for  whom  he  desires  to  vote  or  strike  out  the  name  or  names  of  those  for 
whom  he  does  not  desire  to  vote  upon  the  oflJicial  ballot  so  provided  or  must  otherwise 
suitably  indicate  in  the  blank  space  thereon  the  nominee  or  nominees  for  whom  he 
desires  to  vote,  and  must  sign  the  said  official  ballot  in  his  own  handwriting  in  the 
presence  of  a  subscribing  witness,  and  place  or  caused  to  be  placed  thereon  the  number 
of  at  least  one  policy  held  by  him.  Failure  to  state  or  to  correctly  state  such  policy 
number  shall  not  render  a  ballot  void  or  subject  the  policyholder  to  any  penalty. 

17.  Such  policyholder  must  enclose  the  ofhcial  ballot  so  marked  in  such  return 
envelope  or  in  a  similarly  inscribed  envelope.  Such  envelope  containing  the  ballot 
sealed   and    postpaid    shall   be   mailed    by   the    policyholder   to   the   home   office   of   the 


12G  Studies  in  Practical  Life  Insurance 

company.  No  policyholder  may  vote  for  more  than  the  numter  of  directors  so  to  be 
elected  and  all  ballots  upon  which  the  intent  of  the  policyholder  does  not  fairly  appear 
shall  be  void. 

18.  Any  policyholder  may  vote  by  proxy  executed  to  any  person,  whether  des- 
ignated in  the  certificates  filed  as  aforesaid  or  otherwise.  The  execution  of  a  proxy 
shall  be  attested  by  a  subscribing  witness  and  the  proxy  ?hv.\\  set  forth  the  number 
of  at  least  cne  ijolicy  held  by  the  person  giving  it.  A  proxy  shall  not  be  valid  unless 
executed  within  three  months  prior  to  the  election  and  shall  be  used  only  at  such 
election  or  any  adjournment  thereof  and  may  be  revoked  by  the  policyholder  giving  the 
same  at  any  time  prior  to  the  opening  of  the  polls  upon  the  day  of  such  election.  In 
exercising  such  proxy  the  holder  cr  holders  thereof  shall  vote  only  upon  the  official 
ballot,  or  the  duplicate  thereof,  furnished  to  such  policyholder  as  hereinbefore  provided, 
to  which  such  party  shall  be  attached.  In  so  voting  the  proxy  holder  shall  sign  said 
ballot  in  the  name  of  the  policyholder,  and  shall  also  sign  his  own  name  as  proxy. 
Ballots  voted  by  prcxy  holders  shall  be  mailed  to  the  home  office,  or  voted  in  person 
by  said  proxy  holder,  in  the  same  manner  as  herein  provided  for  ballots  voted  directly 
by  policyholders. 

19.  The  votes  cast  at  such  election  shall  be  limited  to  the  candidates  nominated  as 
aforesaid  except  that  in  case  of  a  vacancy  occurring  upon  any  ticket  so  nominated  the 
board  of  directors  of  such  corporation,  if  the  candidrte  was  upon  the  administration 
ticket,  and  a  majority  of  the  nominators  if  the  candidate  was  upon  an  independent 
ticket,  shall  nominate  another  candidate  in  his  place  by  filing  a  certificate  of  said 
nomination  with  the  superintendent  of  insurance  and  a  certified  copy  thereof  at  the 
home  office  of  the  company  if  such  vacancy  occurs  m.cre  than  five  months  prior  to  the 
day  set  for  the  election,  and  the  name  of  the  candidate  so  selected  shall  be  set  forth 
in  the  official  ballots  sent  out  by  the  company.  If  such  vacancy  occurs  within  five 
months  pricr  to  such  election  then  the  directors  elected  at  such  election  shall  have 
power  to  fill  such  vacancy. 

20.  All  ballots  by  mail  shall  be  received  at  the  home  office  of  a  company  holding 
an  election  by  two  or  m.cre  persons,  one-half  of  whom  shall  be  appointed  for  that 
purpose  by  the  superintendent  of  insurance  and  one-half  by  the  directors  of  the  company. 
The  compensation  of  the  custodians  so  appointed  shall  be  paid  by  the  company.  Such 
custodians  shall  keep  a  daily  record  of  the  envelopes  marked  as  containing  ballots  for 
directors  which  are  received"  at  the  home  office,  and  shall  securely  retain  them  in  their 
joint  custody  in  safety  vaults  or  compartments  accessible  only  to  such  custodians  and 
not  to  either  of  them  separately,  under  regulations  prescribed  by  the  superintendent 
of  insurance.  Pricr  to  the  closing  of  the  polls  election  day  said  custodians  shall  deliver 
all  ballots  so  received  by  them  to  the  inspectors  of  election. 

21.  The  electicn  shall  be  held  at  the  home  office  of  the  company.  The  polls 
shall  be  opened  at  ten  o'clock  in  the  forenoon  and  remain  open  until  four  o'clock  in  the 
afternoon  of  the  day  of  electicn,  at  which  time  they  shall  be  closed.  All  votes  cast  at 
such  election  shall  be  by  ballot  as  hereinbefore  provided. 

22.  The  superintendent  of  insurance  shall  appoint  an  adequate  number  of  inspec- 
tors of  electicn  who  m.ay  employ  expert  accountants  and  assistants  and  may  procure 
stationery  and  supplies  for  conducting  the  electicn  and  canvassing  the  votes.  Their 
compensation  and  necessary  disbursements  shall  be  paid  by  the  company.  Such 
inspectors  shall  have  power  to  determine  all  questions  concerning  the  verification  of 
the  ballots,  the  ascertainment  cf  the  validity  thereof,  the  qualifications  of  the  voters 
and  the  canvass  of  the  vote;  and  with  respect  thereto  shall  act  under  such  rules  and 
regulations  as  shall  be  prescribed  by  the  superintendent  of  insurance. 

23.  All  envelopes  marked  substantially  as  hereinbefore  prescribed  received  by 
rail  at  the  home  office  of  the  company  at  any  time  prior  to  the  day  of  election  or  on 
that  day  before  the  polls  are  closed  shall  be  forthwith  delivered  intact  without  opening 
to  the  custcdians  appointed  as  hereinbefcre  provided  and  before  the  polls  are  closed 
shall  be  delivered  to  the  inspectors  cf  election. 

24.  No  person  shall  ccnceal  cr  withhold  or  aid  or  abet  any  other  person  in  con- 
cealing or  withholding  from  the  custodians  or  inspectors  any  such  envelope;  nor  shall 
any  person,  other  than  an  inspectcr,  open  cr  aid  or  abet  any  person  to  open  any  such 
envelopes. 

25.  No  ballots  received  by  mail  at  the  office  of  the  company  or  offered  personally 
or  by  proxy  after  the  polls  are  closed  shall  be  counted.  All  ballots  offered  personally 
or  under  proxies  and  all  ballots  received  by  nail  at  the  office  of  the  company  as  afore- 
said before  the  polls  are  closed  shall  be  received  by  the  inspectors  subject  to  verification 
and  ascertainment  of  the  validity  thereof  and  of  the  qualifications  of  the  voter. 

26.  Immediately  upon  the  closing  cf  the  polls  the  inspectors  shall  proceed  to  the 
examination  of  the  ballots  and  shall  canvass  the  votes  lawfully  cast.  The  canvass  shall 
proceed  from  day  to  day  and  the  inspectors  shall  certify  the  result  to  the  company  and 
to  the  superintendent  of  insurance  as  soon  as  it  is  completed. 


Studies  in  Practical  Life  Insurance  127 

27.  Representatives  designated  by  a  majority  of  each  three  persons  who  shall 
have  been  appointed  to  receive  proxies  to  be  voted  for  tickets  nominated  as  aforesaid 
may,  in  such  number  as  shall  be  approved  by  the  superintendent  of  insurance,  be 
present  during  the  casting,  verification  and  canvass  of  the  votes.  The  compensation  of 
such  representatives  shall  not  be  a  charge  upon  or  paid  from  the  funds  of  the  company. 
*  28.  All  ballots  and  proxies  received  by  the  inspectors  of  election  shall  immedi- 
ately upon  the  completion  of  the  canvass  be  placed  in  sealed  packages  and  shall  be 
preserved  by  the  said  inspectors  for  a  period  of  four  months  subject  to  the  order  of 
any  court  having  jurisdiction  of  any  proceedings  relating  thereto. 

29.  The  superintendent  of  insurance  shall  have  power  to  supervise  and  direct  the 
methods  and  procedure  of  all  elections  herein  provided  for  and  to  make  all  further 
needful  rules  and  regulations  concerning  the  same.  All  bills  for  or  on  account  of  the 
custodians  of  ballots  and  inspectors  of  election,  their  employees,  assistants,  necessary 
expenses  or  disbursements,  during  the  conduct  of  such  election,  and  the  canvass  of  the 
votes,  shall  be  approved  by  the  superintendent  of  insurance  before  payment  by  the 
company. 

30.  The  said  elections  and  the  conduct  thereof  shall  at  all  times  be  subject  to  the 
supervision  and  control  of  the  courts  in  like  manner  as  elections  for  state,  county  and 
municipal  officers  so  far  as  applicable. 

31.  The  including  by  any  corporation  of  the  name  of  any  person  in  any  list  of 
policyholders  required  by  this  section  shall  not  be  construed  as  an  admission  by  the 
corporation  of  the  validity  of  any  policy,  and  no  such  list  shall  be  competent  evidence 
against  the  corporation  in  any  action  or  proceeding  in  which  the  question  of  the  validity 
of  any  policy  or  of  any  claim  under  it  is  involved. 

32.  No  insurance  company,  and  no  officer,  agent  or  employee  thereof  shall  know- 
ingly omit  the  name  of  a  policyholder  and  voter  from  the  lists  herein  required  to  be 
filed,  or  shall  knowingly  omit  to  give  the  correct  name  and  address  of  such  policyholder 
and  voter,  or  knowingly  give  a  wrong  address,  or  shall  expend,  advance  or  loan  any 
money  of  the  company  contrary  to  the  provisions  of  this  section. 

33.  Except  where  such  expenditure  is  authorized  or  required  by  this  section, 
no  money  of  the  company  shall  be  expended  in  connection  with  such  election  or  in 
canvassing  therefor,  and  no  officer  or  agent  of  the  company  shall  directly  or  indirectly 
make  any  advance  or  loan  of  such  moneys  to  any  person  in  connection  with  or  for 
the  purpose  of  such  election  or  canvass. 

34.  No  officer,  salaried  agent  or  employee  shall,  within  the  period  between  the 
filing  of  the  nominations  and  the  election,  during  business  hours,  devote  any  of  his  time 
in  soliciting  votes  in  support  of  or  in  opposition  to  any  candidate  or  list  of  candidates 
in  ccnnecticn  with  any  such  election.  No  officer,  agent,  or  employee  shall  compel  or 
coerce  any  other  officer,  agent  or  employee  to  support,  work  for,  or  oppose  any  candidate 
or  any  list  of  candidates.  The  stationery  or  supplies  cf  the  company  or  office  space 
devoted  to  the  conduct  of  its  business  shall  not  be  used  for  furthering  the  interest  of 
any  ticket  or  candidate  thereon. 

35.  No  person,  whether  connected  with  the  company  or  otherwise,  shall  issue  or 
cause  to  be  issued  any  circular  or  other  written  or  printed  communication  either  in 
behalf  cf  or  in  opposition  to  any  ticket  or  any  candidate  thereon  containing  any  false 
statement, 

Source. — Former  §  94,  as  amended  by  L.  1907,  chap.  623. 

S   96.      Limitation  of  new  business. 

No  domestic  life  insurance  corporation  shall  issue  in  any  year  new  policies  for  a 
larger  amount  in  the  aggregate  than  as  follows,  to  wit:  If  the  total  amount  of  insurance 
by  said  corporation  in  force  on  the  thirty-first  day  of  December  of  the  preceding  year 
is  more  than  fifty  million  dollars,  and  not  in  excess  of  one  hundred  million  dollars,  not 
more  than  thirty  per  centum  thereof;  if  more  than  one  hundred  million  dollars,  and  not 
in  excess  of  three  hundred  million  dollars,  not  more  than  tw^enty-five  per  centum 
thereof,  or  thirty  million  dollars,  whichever  is  the  larger;  if  more  than  three  hundred 
million  dollars,  and  not  in  excess  of  six  hundred  million  dollars,  not  more  than  twenty 
per  centum  thereof,  or  seventy-five  million  dollars,  whichever  is  the  larger;  if  more 
than  six  hundred  million  dollars,  not  more  than  one  hundred  and  fifty  million  dollars, 
or  it  may  increase  its  new  business  over  the  largest  amount  issued  in  any  one  of  the 
three  years  immediately  preceding  in  the  proportion  in  respect  to  said  amount  which 
the  difference  between  twenty-five  per  centum  of  its  net  renewal  premiums  computed 
according  to  the  bases  of  mortality  and  interest  assumed  in  calculating  its  liabilities, 
and  its  total  expenses  for  such  preceding  year,  after  deducting  from  said  total  expenses 
(1),  the  items  of  first  year  expenditure  specified  in  the  first  sentence  of  section  ninety- 
seven  of  this  chapter,  (2)  its  actual  investment  expenses  (not  exceeding  one-fourth  of 
one  per  centum  of  the  mean  invested  assets)  and  (3)  taxes  on  real  estate  and  other 
outlays  exclusively  in  connection  with  real  estate,  bears  to  said  net  renewal  premiums; 


128  Studies  in  Practical  Life  Insurance 

provided,  that  in  determining  the  amount  of  insurance  in  force  and  the  amount  of  new 
insurance  issued,  industrial  policies  issued  upon  the  weekly  premium  plan  and  all 
premiums  on  such  policies  and  the  expenses  in  connection  with  such  policies,  shall  be 
excluded  and  there  shall  be  included  only  that  insurance  upon  which  the  first  premium 
or  instalment  thereof  has  actually  been  received.  A  foreign  life  insurance  corporation, 
which  shall  not  conduct  its  business  within  the  limitation  and  in  accordance  with  the 
requirements  imposed  by  this  section  upon  domestic  corporations,  shall  not  be  permittfed 
to  do  business  within  this  state. 

Source. — Former  S     96.     Amended  by  L.  1910,  chap.  697. 

§   97.      Limitation  of  expenses. 

No  domestic  life  insurance  corporation  shall  in  any  calendar  year,  after  the  year 
nineteen  hundred  and  six,  expend  or  become  liable  for,  including  any  and  all  amounts 
which  any  person,  firm  or  corporation  is  permitted  to  expend  on  its  behalf  or  under  any 
agreement  with  it  (1)  for  commissions  on  first  year's  premiums,  (2)  for  compensation, 
not  paid  by  commission,  for  services  in  obtaining  new  insurance  exclusive  of  salaries 
paid  in  good  faith  for  agency  supervision  either  at  the  home  office  or  at  branch  offices, 
(3)  for  medical  examinations  and  inspections  of  proposed  risks,  and  (4)  for  advances 
to  agents,  a  total  amount  exceeding  in  the  aggregate  (a)  the  loadings  upon  the  premiums 
for  the  first  year  of  insurance  received  in  said  calendar  year  (calculated  on  the  basis 
of  the  American  experience  table  of  mortality  with  interest  at  the  rate  of  three  and 
one-half  per  centum  per  annum)  and  (b)  the  present  values  of  the  assumed  mortality 
gains  for  the  first  five  years  of  insurance  on  policies  in  force  at  the  end  of  said  calendar 
year  on  which  the  first  premium,  or  instalment  thereof,  has  been  received  during  said 
calendar  year,  as  ascertained  by  the  select  and  ultimate  method  of  valuation  as 
provided  in  section  eighty-four  of  this  chapter;  and  (c)  on  policies  issued  and  terminated 
in  said  calendar  year  the  full  gross  premiums  received,  less  the  net  cost  of  insurance 
for  the  time  the  insurance  was  in  force,  computed  by  the  American  experience  select 
and  ultimate  uTble,  three  and  one-half  per  centum.  No  such  corporation  shall  make  or 
incur  any  expense  or  permit  any  expense  to  be  made  or  incurred  upon  its  behalf  or  under 
any  agreement  with  it,  except  actual  investment  expenses  (not  exceeding  one-fourth  of 
one  per  centum  of  the  mean  invested  assets)  and  also  except  taxes  on  real  estate  and 
other  outlays  exclusively  in  connection  with  real  estate,  in  excess  of  the  aggregate 
amount  of  the  actual  loadings  upon  premiums  received  in  said  year  calculated  according 
to  the  standards  adopted  by  the  company  under  section  eighty-four  of  this  chapter, 
and  the  present  values  of  the  assumed  mortality  gains  hereinbefore  mentioned.  No 
such  corporation,  nor  any  person,  firm  or  corporation  on  its  behalf  or  under  any  agree- 
ment with  it  shall  pay  or  allow  to  any  agent,  broker  or  other  person,  firm  or  -corpo- 
ration for  procuring  an  application  for  life  insurance,  for  collecting  any  premium  thereon 
or  for  any  other  service  performed  in  connection  therewith  any  compensation  other 
than  that  which  has  been  determined  in  advance.  All  bonuses,  prizes  and  rewards,  and 
all  increased  or  additional  commissions  or  compensation  of  any  sort  based  upon  the 
volume  of  any  new  or  renewed  business  or  the  aggregate  of  policies  written  or  paid  for, 
are  prohibited.  No  such  corporation  shall  pay  commissions  upon  renewal  premiums 
received  upon  policies  issued  after  the  year  nineteen  hundred  and  six,  in  excess  of  five 
per  centum  of  the  premium  annually  for  fourteen  years  after  the  first  year  of  insurance 
in  the  case  of  endowment  policies  providing  for  less  than  twenty  annual  premiums, 
nor  in  excess  of  seven  and  one-half  per  centum  of  the  premium  annually  for  the  first 
nine  years  after  the  first  year  of  insurance  and  five  per  centum  of  the  premium  annually 
for  the  next  ensuing  five  years  in  the  case  of  other  forms  of  policies;  provided  that  an 
amount  found  to  be  equivalent  to  the  aggregate  amount  so  payable  by  a  calculation 
approved  by  the  superintendent  of  insurance  and  based  upon  mortality,  interest  and 
lapse  rates,  may  be  distributed  through  three  or  more  years,  or  through  a  period 
exceeding  fourteen  years,  but  not  more  than  two-fifths  of  such  amount  shall  be  payable 
for  any  one  year;  provided  further  that  in  any  agency  district  subject  to  the  supervision 
of  a  local  salaried  representative  the  renewal  commission  payable  to  agents  of  such 
district  shall  not  exceed  two-thirds  of  the  foregoing  rates  annually  for  fourteen  years, 
subject  to  the  calculation  as  aforesaid;  provided  further  that  any  such  corporation  may 
condition  the  allowance  or  payment  in  whole  or  in  part  of  any  of  the  renewal  com- 
missions allowed  to  be  paid  as  aforesaid  upon  the  efficiency  of  service  of  the  agent 
receiving  the  same  or  upon  the  amount  and  quality  of  the  business  renewed  under  his 
supervision;  and  also  provided  that  a  fee  not  exceeding  three  per  centum  may  be  paid 
for  the  collection  of  premiums  which  shall  be  received  for  any  year  after  the  fifteenth 
year  of  insurance.  If  any  such  corporation  shall  compensate  its  agents,  or  any  of  them, 
after  the  first  insurance  year,  in  whole  or  in  part,  upon  any  other  plan  than  commissions 
and  collection  fees,  the  aggregate  sum  so  paid  shall  in  no  year  exceed  the  limitations 
herein  imposed  and  the  schedule  and  plan  of  such  compensation  shall  be  submitted 
to  and  api)roved  by  the  superintendent  of  insurance.  No  such  corjioration,  nor  any 
person,  firm  or  cori)oration  on  its  behalf  or  under  any  agreement  with  it,  shall  make 
any   loan  or  advance   to  any   j)erson,   firm  or  corporation   soliciting  or  undertaking  to 


Studies  lit  Practical  Life  Insurance  129 

solicit  applications  for  insurance  without  adequate  collateral  security,  nor  shall  any  such 
loan  or  advance  be  made  upon  the  security  of  renewal  commissions,  or  of  other  compen- 
sation earned  or  to  be  earned  by  the  borrower  except  advances  against  compensation 
for  the  first  year  of  insurance.  A  foreign  life  insurance  corporation  which  shall  not  con- 
duct its  business  within  the  limitations  and  in  accordance  with  the  requirements  imposed 
by  this  section  upon  domestic  corporations  shall  not  be  permitted  to  do  business  within 
the  state.  This  section  shall  not  apiily  to  expenses  made  or  incurred  in  the  business 
of  industrial  insurance  nor,  except  as  to  the  limitation  of  expenses  for  the  first  year  of 
insurance  and  as  to  compensation  of  and  loans  and  advances  to  agents  or  solicitors, 
to  stock  corporations  issuing  and  representing  themselves  as  issuing  nouparticipating 
policies  exclusively. 

Source. — Former  S  97,  as  amended  by  L.  1909,  chap.  301.  Amended  by  L.  1910, 
chap.  697. 

S  9S.  Salaries  of  officers  and  agents;  when  fixed  by  board  of  directors. 
No  domestic  life  insurance  corporation  shall  pay  any  salary,  compensation  or 
emolument  to  any  officer,  trustee  or  director  thereof,  nor  any  salary,  compensation  or 
emolument  amounting  in  any  year  to  more  than  five  thousand  dollars  to  any  person, 
firm  or  corporation  unless  such  payment  be  first  authorized  by  a  vote  of  the  board  of 
directors  of  such  life  insurance  corporation.  No  such  life  insurance  corporation  shall 
make  any  agreement  with  any  of  its  officers,  trustees  or  salaried  employees  whereby  it 
agrees  that  for  any  services  rendered  or  to  be  rendered  he  shall  receive  any  salary, 
compensation  or  emolument  that  will  extend  beyond  a  period  of  twelve  months  from  the 
date  of  such  agreement.  No  such  corporation  shall  grant  any  pension  to  any  officer, 
•director  or  trustee  thereof  or  to  any  member  of  his  family  after  his  death. 

Source. — Former  §  98. 

S   99.     Vouchers. 

No  domestic  life  insurance  corporation  shall  make  any  disbursement  of  one 
hundred  dollars  or  more  unless  the  same  be  evidenced  by  a  voucher  signed  by  or  on 
behalf  of  the  person,  firm  or  corporation  receiving  the  money  and  correctly  describing 
the  consideration  for  the  payment,  and  if  the  same  be  for  services  and  disbursements 
setting  forth  the  services  rendered  and  an  itemized  statement  of  the  disbursements 
made,  and  if  it  be  in  ccnnecticn  with  any  matter  pending  before  any  legislative  or 
public  body  or  before  any  department  or  officer  of  any  government,  correctly  describing 
in  addition  the  nature  of  the  matter  and  of  the  interest  of  such  corporation  therein, 
or  if  such  a  voucher  cannot  be  obtained  by  an  affidavit  stating  the  reasons  therefor 
and  setting  forth  the  particulars  above  mentioned. 

Source. — Former  §  99. 

S   100.     Investments. 

No  domestic  life  insurance  corporation,  whether  incorporated  by  special  act  or 
under  a  general  law,  shall  invest  in  or  loan  upon  any  shares  of  stock  of  any  corporation, 
other  than  a  municipal  corporation,  nor,  excepting  government,  state  or  municipal 
securities,  shall  it  invest  in,  or  loan  upon,  any  bonds  or  obligations  which  shall  not  be 
secured  by  adequate  collateral  security  or  where  more  than  one-third  of  the  total  value 
of  the  collateral  security  therefor  shall  consist  of  shares  of  stock.  Every  such  corpora- 
tion which  on  the  first  day  of  .lune,  nineteen  hundred  and  six,  owned  any  shares  of 
stock  ether  than  public  stocks  of  municipal  corporations  whenever  the  same  were 
acquired,  or  any  bonds  or  obligations  of  the  kinds  above  described  where  said  bonds 
or  obligations  were  acquired  after  the  first  day  of  March,  nineteen  hundred  and  six, 
shall  dispose  of  the  said  shares  of  stock  and  of  said  bonds  and  obligations  within  five 
years  from  the  thirty-first  day  of  December,  nineteen  hundred  and  six,  and  in  each  year 
prior  to  the  expiration  of  said  five  years  shall  make  such  reduction  of  its  holdings  of 
said  securities  as  may  be  approved  in  writing  by  the  superintendent  of  insurance.  No 
investment  or  loan  shall  be  made  by  any  such  life  insurance  corporation  unless  the 
same  shall  first  have  been  authorized  by  the  board  of  directors  or  by  a  committee 
thereof  charged  with  the  duty  of  supervising  such  investment  or  loan.  No  such  corpo- 
ration shall  subscribe  to  or  participate  in  any  underwriting  of  the  purchase  or  sale 
of  securities  or  property,  or  enter  into  any  transaction  for  such  purchase  or  sale  on 
account  of  said  corporation  jointly  with  any  other  person,  firm  or  corporation;  nor  shall 
any  such  corporation  enter  into  any  agreement  to  withhold  from  sale  any  of  its  property, 
but  the  disposition  of  its  property  shall  be  at  all  times  within  the  control  of  its  board 
■of  directors.  Any  such  corporation,  in  addition  to  other  investments  allowed  by  law, 
may  invest  any  of  its  funds  in  any  duly  authorized  bonds  or  evidences  of  debt  of  any 
city,  county,  town,  village,  school  district,  municipality  or  other  civil  division  of  any 
state  and  may  loan  upon  the  security  of  imi)roved  unencumbered  real  property  in  any 
•state  worth  fifty  per  centum  more  than  the  amount  loaned  thereon.  Provided,  how- 
ever, that  nothing  in  this  section  contained  shall  be  construed  as  prohibiting  a  life 
insurance  company  from  entering  into  an  agreement  for  the  purpose  of  protecting  the 


130  Studies  in  Practical  Life  Insurance 

interests  of  the  company  in  securities  lawfully  held  by  it,  or  for  the  purpose  of  reorgani- 
zation of  a  corporation  which  issued  securities  so  held,  and  from  depositing  such 
securities  with  a  committee  or  depositaries  appointed  under  such  agreement;  but  such 
agreement  and  the  deposit  of  securities  thereunder  must  first  be  approved  in  writing 
by  the  superintendent  of  insurance  with  a  statement  of  his  reasons  for  such  approval. 
Nor  shall  this  section  be  construed  as  preventing  such  company  from  accepting  cor- 
porate stock  or  bonds  or  other  securities,  which  may  be  distributed  pursuant  to  any 
such  agreement  approved  as  aforesaid  or  to  any  plan  of  reorganization  approved  in 
writing  by  the  superintendent  of  insurance  with  a  statement  of  his  reason  for  such 
approval.  But  if  any  securities  so  received  shall  consist  in  whole  or  in  part  of  stock 
in  any  corporation  or  of  bonds  or  obligations  which  shall  not  be  secured  by  adequate 
collateral  security  or  where  more  than  one-third  of  the  total  value  of  the  collateral 
security  therefor  shall  consist  of  shares  of  stock,  then  any  stock  and  any  such  bond  or 
obligation  so  received  shall  be  disposed  of  within  five  years  from  the  time  of  their 
acquisition  or  before  the  expiration  of  such  further  period  or  periods  of  time  as  may 
be  fixed  in  writing  for  that  purpose  by  the  superintendent  of  insurance. 
Source.— Former  §  100,  as  amended  by  L.  1908,  chap.  9. 

§  101.     Standard  provisions. 

On  and  after  January  first,  nineteen  hundred  and  ten,  no  policy  of  life  or  endowment 
insurance  shall  be  issued  or  delivered  in  this  state  unless  and  until  a  copy  of  the  form 
thereof  has  been  filed  with  the  superintendent  of  insurance  and  approved  by  him; 
nor  shall  such  policy,  except  policies  of  industrial  insurance  where  the  premiums  are 
payable  weekly,  be  so  issued  or  delivered  unless  it  contains  in  substance  the  following 
provisions : 

1.  A  provision  that  the  insured  is  entitled  to  a  grace  either  of  thirty  days  or  of  one 
month  within  which  the  payment  of  any  premium  after  the  first  year  may  be  mada, 
subject  at  the  option  of  the  company  to  any  interest  charge  not  in  excess  of  six  per 
centum  per  annum  for  the  number  of  days  of  grace  elapsing  before  the  payment  of 
the  premium,  during  which  period  of  grace  the  policy  shall  continue  in  full  force,  but 
in  case  the  policy  becomes  a  claim  during  the  said  period  of  grace  before  the  overdue 
premium  or  the  deferred  premiums  of  the  current  policy  year  if  any  are  paid,  the 
amount  of  such  premiums,  with  interest  on  any  overdue  premium,  may  be  deducted 
from  any  amount  payable  under  the  policy  in  settlement. 

2.  A  provision  that  the  policy  shall  be  incontestable  after  two  years  from  its  date 
of  issue  except  for  nonpayment  of  premiums  and  except  for  violation  of  the  conditions 
of  the  policy  relating  to  military  or  naval  service  in  time  of  war. 

3.  A  provision  that  the  policy  shall  constitute  the  entire  contract  between  the 
parties,  but  if  the  company  desires  to  make  the  application  a  part  of  the  contract  it 
may  do  so  provided  a  copy  of  such  application  shall  be  endorsed  upon  or  attached  to 
the  policy  when  issued,  and  in  such  case  the  policy  shall  contain  a  provision  that  the 
policy  and  the  application  therefor  shall  constitute  the  entire  contract  between  the 
parties. 

4.  A  provision  that  if  the  age  of  the  insured  has  been  misstated  the  amount 
payable  under  the  policy  shall  be  such  as  the  premium  would  have  purchased  at  the 
correct  age. 

5.  A  provision  that  the  policy  shall  participate  in  the  surplus  of  the  company 
annually. 

6.  A  provision  specifying  the  options  to  which  the  policyholder  is  entitled  in  the 
event  of  default  in  a  premium  payment  after  three  full  annual  premiums  shall  have 
been  paid. 

7.  A  provision  that  after  three  full  years'  premiums  have  been  paid,  the  company 
at  any  time,  while  the  policy  is  in  force,  will  advance,  on  proy.er  assignment  or  pledge 
of  the  policy  and  on  the  sole  security  thereof,  at  a  specified  rate  of  interest,  a  sum 
equal  to,  or  at  the  option  of  the  owner  of  the  jiolicy  less  than,  the  reserve  at  the  end 
of  the  current  policy  year  on  the  nolicy  and  on  any  dividend  additions  thereto,  less  a 
sum  not  more  than  two  and  one-half  per  centum  of  the  amount  insured  by  the  policy 
and  of  any  dividend  additions  thereto;  and  that  the  company  will  deduct  from  such  loan 
value  an.v  existing  indebtedness  on  the  policy  and  any  unpaid  balance  of  the  premium 
for  the  current  policy  year,  and  may  collect  interest  in  advance  on  the  loan  to  the  end 
of  the  current  policy  year;  which  provision  may  further  provide  that  such  loan  may  be 
deferred  for  not  exceeding  six  months  after  the  application  therefor  is  made.  A  com- 
pany may,  in  lieu  of  the  provision  hereinabove  permitted  for  the  deduction  from  a 
loan  on  the  jjolicy  of  a  sum  not  more  than  two  and  one-half  per  centum  cf  the  amount 
insured  by  the  policy  and  of  any  dividend  additions  thereto,  insert  in  the  policy  a  pro- 
vision thnt  one-fifth  of  the  entire  reserve  may  be  deducted  in  case  of  a  loan  under  the 
policy,  or  m;iy  provide  therein  that  the  deduction  may  be  the  said  two  and  one-half  per 
centum  or  tiie  one-fifth  of  the  said  entire  reserve  at  the  option  of  the  company. 


Studies  in  Practical  Life  Insurance  131 

8.  A  table  showing  in  figures  the  loan  values,  if  any,  and  the  options  available 
under  the  policy  each  year  upon  default  in  premium  payments,  during  at  least  the  first 
twenty  years  of  the  policy. 

9.  In  case  the  proceeds  of  a  policy  are  payable  in  installments  or  as  an  annuity, 
a  table  showing  the  amounts  of  the  installments  or  annuity  payments. 

10.  A  provision  that  the  holder  of  a  policy  shall  be  entitled  to  have  the  policy 
reinstated  at  any  time  within  three  years  from  the  date  of  default  unless  the  cash 
value  has  been  duly  paid,  or  the  extension  period  expired,  upon  the  production  of 
evidence  of  insurability  satisfactory  to  the  company  and  the  payment  of  all  overdue 
premiums  and  any  other  indebtedness  to  the  company  upon  said  policy  with  interest 
at  a  rate  not  exceeding  six  per  centum  per  annum  payable  annually. 

Any  of  ihe  foregoing  provisions  or  portions  thereof  not  applicable  to  single  pre- 
mium or  noni;articipating  or  term  policies  shall  to  that  extent  not  be  incorporated 
therein;  and  any  such  policy  may  be  issued  or  delivered  in  this  state  which  in  the 
opinion  of  the  superintendent  of  insurance  contains  provisions  on  any  one  or  more  of 
the  several  foregoing  requirements  more  favorable  to  the  policyholder  than  herein- 
before required. 

Source. — Former  §  101,  and  this  section  added  by  chap.  301  of  1909.  In  effect 
January  1,  1909. 

S   103.     Annual  reports  of  life  insurance  corporations. 

In  addition  to  any  other  matter  which  may  be  required  by  law  or  pursuant  to  law 
by  the  superintendent  of  insurance  to  be  stated  therein  every  annual  report  of  every 
life  insurance  corporation  doing  business  in  the  state  of  New  York,  made  pursuant  to 
section  forty-four  of  this  chapter,  shall  contain  an  accurate,  concise  and  complete 
statement  of  the  following  matter,  to  wit:  (1)  All  the  real  property  held  by  the  corpo- 
ration, the  dates  of  acquisition,  the  names  of  the  vendors,  the  actual  cost,  the  value  at 
which  it  is  carried  on  the  company's  books,  the  market  value,  the  amounts  expended 
during  the  year  for  repairs  and  improvements,  the  gross  and  net  income  from  each 
parcel,  and  if  any  portion  thereof  be  occupied  by  the  company  the  rental  value  thereof, 
a  statement  of  any  certificate  issued  by  the  superintendent  extending  the  time  for  the 
disposition  thereof,  and  all  purchases  and  sales  made  since  the  last  annual  statement, 
with  particulars  as  to  dates,  names  of  vendors  and  vendees,  and  the  consideration. 
(2)  The  amount  of  existing  loans  upon  the  security  of  real  property,  stating  the  amount 
loaned  upon  property  in  each  state  and  foreign  country.  (3)  The  moneys  loaned  uy  the 
corporation  to  any  person  other  than  loans  upon  the  security  of  real  property  above 
mentioned  and  other  than  loans  upon  policies  the  actual  borrowers  thereof,  the  maturity 
and  rate  of  interest  of  such  loans,  the  securities  held  therefor,  and  all  substitutions  of 
securities  in  connection  therewith,  and  the  same  particulars  with  reference  to  any 
loans  made  or  discharged  since  the  last  annual  statement.  (4)  All  other  property 
owned  by  the  company  or  in  which  it  has  any  interest  including  all  securities,  whether 
or  not  recognized  by  the  law  as  proper  investments,  the  dates  of  acquisition,  from  whom 
acquired,  the  actual  ccst,  the  value  at  which  the  property  is  carried  upon  the  bocks, 
the  market  value,  the  intei-est  or  dividends  received  thereon,  during  the  year;  also  all 
purchases  and  sales  of  property  other  than  real  estate  made  since  the  last  annual 
statement,  with  particulars  as  to  dates,  names  of  purchasers  and  sellers,  and  the  con- 
sideration; and  also  the  income  received  and  outlays  made  in  connection  with  all  such 
property.  (5)  All  commissions  paid  to  any  persons  in  connection  with  loans  or  pur- 
chases or  sales  of  any  property,  and  a  statement  of  all  payments  for  legal  expenses, 
giving  particulars  as  to  dates,  amounts  and  names  and  addresses  of  payees.  (6)  All 
moneys  expended  in  connection  with  any  matter  pending  before  any  legislative  body 
or  any  officer  or  department  of  government,  giving  particulars  as  to  dates,  amounts, 
names  and  addresses  of  payees,  the  measure  or  proceeding  in  connection  with  which 
the  payment  was  made,  and  the  interest  of  the  corporation  therein.  (7)  The  names  of 
the  officers  and  directors  of  the  company,  the  proceedings  at  the  last  annual  election, 
^ving  the  names  of  c-ndidates  and  the  number  of  votes  cast  for  each  and  whether  in 
person,  by  proxy  or  by  mail.  (8)  The  salary,  compensation  and  emoluments  received  by 
oflScers  cr  directors  and  where  the  same  amounts  to  more  than  five  thousand  dollars 
that  received  by  any  person,  firm  or  corporation,  with  particulars  as  to  dates,  amounts, 
payees  and  the  authority  by  which  the  payment  wt|^  made;  also  all  salaries  paid  to 
any  representative  either  at  the  heme  office,  or  at  any  branch  office,  or  agency,  for  agency 
supervision.  (9)  The  largest  balances  carried  in  each  bank  or  trust  company  during 
•each  month  of  the  year.  (10)  All  death  claims  resisted  or  compromised  during  the 
year,  with  particulars  as  to  sums  insured,  sums  paid  and  reasons  assigned  for  resisting 
or  compromising  the  same  in  each  case.  (11)  A  complete  statement  of  the  profits  and 
losses  upon  the  business  transacted  during  the  year  and  the  sources  of  such  gains  and 
lppc.pQ_  ^J]^]  ;v  statement  Fhowing  separately  the  margins  upon  premiums  for  the  first  year 
of  insurance  ascertained  according  to  the  select  and  ultimate  method  of  valuation  as 
provided  in  section  eighty-four  of  this  chapter  and  the  actual  expenses  chargeable 
•to    the    I  rocurement    cf    new    business    incurred    since    the    last    annual    statement    as 


lo2  Studies  in  Prdctical  Life  hisunnice 

enumerated  in  section  ninety-seven  of  this  article.  A  foreign  corporation,  issuing  both 
participating  and  nonparticipating  policies,  shall  make  a  separate  statement  of  profits 
and  losses,  margins  and  expenses,  as  aforesaid,  with  reference  to  each  of  said  kinds 
of  business,  and  also  showing  the  manner  in  which  any  general  outlays  of  the  company 
have  been  apportioned  to  each  of  such  kinds  of  business.  (12)  A  statement  separately 
showing  the  amount  of  the  gains  of  the  company  for  the  year  attributable  to  policies 
written  after  December  thirty-first,  nineteen  hundred  and  six,  and  the  precise  method 
by  which  the  calculation  has  been  made.  (13)  The  rates  of  annual  dividends  declared 
during  the  year  for  all  plans  of  insurance  and  all  durations  and  for  ages  at  entry,  twenty- 
five,  thirty-five,  forty-five  and  fifty-five,  and  the  precise  method  by  which  such  dividends 
have  been  calculated.  (14)  A  statement  showing  the  rates  of  dividends  declared  upon, 
deferred  dividend  policies  completing  their  dividend  periods  for  all  plans  of  insurance 
and  the  precise  methods  by  which  said  dividends  have  been  calculated.  (15)  A  state- 
ment showing  any  and  all  amounts  set  apart  or  provisionally  ascertained  or  calculated 
or  held  awaiting  apportionment  upon  policies  with  deferred  dividend  periods  longer 
than  cne  year  for  all  plans  of  insurance  and  all  durations  and  for  ages  of  entry  as 
aforesaid,  together  with  the  precise  statements  of  the  methods  of  calculation  by  which. 
the  same  have  been  provisionally  or  otherwise  determined.  (16)  A  statement  of  any 
and  all  reserve  or  surjjlus  funds  held  by  the  company  and  for  what  purpose  they  are- 
claimed  respectively  to  be  held. 

(17.)  A  statement  showing  all  sums  of  money  expended  in,  or  in  any  way  con- 
nected with,  the  election  of  directors  or  trustees,  with  a  statement  when  expended,  by 
whom  expended,  to  whom  paid  and  for  what  purpose. 

Source. — Former  S   103,  as  amended  by  L.  1907,  chap.  (523. 

From  the  Legislative  Law.     §  66.     Legislative  appearances. 

Every  person  retained  or  employed  for  compensation  as  counsel  or  agent  by  any 
person,  firm,  corporation  or  association  to  promote  or  oppose  directly  or  indirectly  the 
passage  of  bills  or  resolutions  by  either  house  or  to  promote  or  oppose  executive  approval 
of  such  bills  or  resolutions,  shall,  in  each  and  every  year,  before  any  service  is  entered 
upon  in  promoting  or  opposing  such  legislation,  file  in  the  office  of  the  secretary  of 
state  a  writing  subscribed  by  such  counsel  or  agent  stating  the  name  or  names  of  the 
person  or  persons,  firm  or  firms,  corporation  or  corporations,  association  or  associations, 
by  whom  or  on  whose  behalf  he  is  retained  or  employed,  together  with  a  brief  descrip- 
tion of  the  legislation  in  reference  to  which  such  service  is  to  be  rendered.  No  notice 
so  filed  shall  be  valid  for  more  than  thirty  days  after  the  adjournment  of  the  session 
of  the  legislature  held  in  the  year  in  which  the  same  is  filed.  It  shall  be  the  duty  of 
the  secretary  of  state  to  provide  a  docket  to  be  known  as  the  docket  of  legislative 
appearances,  with  appropriate  blanks  and  indices,  and  to  forthwith  enter  therein  the 
names  of  the  counsel  and  agents  so  retained  or  employed  and  of  the  persons,  firms, 
corporations  or  associations  retaining  or  employing  them,  together  with  a  brief  descrip- 
tion of  the  legislation  in  reference  to  which  the  service  is  to  be  rendered,  which  docket 
shall  be  open  to  public  inspection.  Upon  the  termination  of  such  employment  the  fact 
of  such  termination,  with  the  date  thereof,  may  be  entered  by  direction  of  either  such 
counsel  or  agent  or  of  the  employer.  No  person,  firm,  corporation  or  association  shall 
retain  or  employ  any  person  to  promote  or  oppose  legislation  for  compensation 
contingent  in  whole  or  in  part  upon  the  passage  or  defeat  of  any  legislative  measure  or 
measures.  No  person  shall  for  compensation  engage  in  promoting  or  opposing  legisla- 
tion except  upon  appearance  entered  in  accordance  with  the  foregoing  provisions  of 
this  section.  And  no  person  shall  accept  any  such  employment  or  render  any  such 
service  for  compensation  contingent  upon  the  passage  or  defeat  of  any  legislative 
measure  or  measures.  It  shall  be  the  duty  of  every  person,  firm,  corporation  or  associa- 
tion within  two  months  after  the  adjournment  of  the  legislature  to  file  in  the  office 
of  the  secretary  of  state  an  itemized  statement  verified  by  the  oath  of  such  person, 
or  in  case  of  a  firm  of  a  member  thereof,  or  in  case  of  a  domestic  corporation  or  associ- 
ation of  an  officer  thereof,  or  in  case  of  a  foreign  corporation  or  association  of  an  officer 
or  agent  thereof,  showing  in  detail  all  expenses  paid,  incurred  or  promised  directly  or 
indirectly  in  connection  with  legislation  pending  at  the  last  previous  session,  with  the 
names  of  the  payees  and  the  amount  paid  to  each,  including  all  disbursements  paid, 
incurred  or  promised  to  counsel  or  agents,  and  also  specifying  the  nature  of  said 
legislation  and  the  interest  of  the  person,  firm,  corporation  or  association  therein. 
The  provisions,  however,  of  this  section  requiring  docket  entries  shall  not  apply  to  duly 
accredited  counsel  or  agents  of  counties,  cities,  towns,  villages,  public  boards  and  public 
institutions.  And  the  jirovisions  hereof  shall  not  be  construed  as  affecting  professional 
services  in  drafting  bills  or  in  advising  clients  and  in  rendering  opinions  as  to  the 
construction  and  effect  of  i)roposed  or  pending  legislation  where  such  professional 
service  is  not  otherwise  connected  with  legislative  action.  Every  person,  every  member 
of  any  firm,  and  every  association  or  corporation  violating  any  provision  of  this  section 
and  every  person  causing  or  participating  in  a  violation  thereof  shall  be  guilty  of  a 
misdemeanor  and,   in   case   of  an   individual,   shall   be    jjiinishable   by   imprisonment    in 


Studies  in  Practical  Life  hisunntcc  133 

a  penitentiary  or  county  jail  for  not  more  than  one  year  or  by  a  fine  of  not  more  than 
one  thousand  dollars  or  by  both,  and,  in  case  of  an  association  or  corporation,  by  a  fine 
of  not  more  than  one  thousand  dollars.  And  in  addition  to  the  penalties  hereinbefore 
imposed  any  corporation  or  association  failing  to  file  the  statement  of  legislative 
expenses  within  the  time  required  shall  forfeit  to  the  people  of  the  state  the  sum  of 
one  hundred  dollars  per  day  for  each  day  after  the  expiration  of  the  two  months  within 
which  such  statement  is  reciuired  to  be  filed,  to  be  recovered  in  an  action  to  be  brought 
by  the  attorney-general. 

Penal  Law.  §  6G5.  Misconduct  of  directors,  officers,  agents  and  employees  of 
corporations. 

A  director,  officer,  agent  or  employee  of  any  corporation  or  joint-stock  association 
who: 

1.  Knowingly  receives  or  possesses  himself  of  any  of  its  property  otherwise  than 
in  payment  for  a  just  demand,  and  with  intent  to  defraud,  omits  to  make  or  to  cause 
or  direct  to  be  made  a  full  and  true  entry  thereof  in  its  books  and  accounts;  or, 

2.  Makes  or  concurs  in  making  any  false  entry,  or  concurs  in  omitting  to  make 
any  rraterial  entry  in  its  books  or  accounts;  or, 

3.  Knowingly  (a),  concurs  in  making  or  publishing  any  written  report,  exhibit  or 
statement  of  its  affairs  or  pecuniary  condition  containing  any  material  statement  which 
is  false,  or  (b),  omits  or  concurs  in  omitting  any  statement  required  by  law  to  be  con- 
tained therein;  or, 

4.  Having  the  custody  or  control  of  its  books,  wilfully  refuses  or  neglects  to  make 
any  proper  entry  in  the  stock  book  of  such  corporation  as  required  by  law,  or  to  exhibit 
or  allow  the  same  to  be  inspected,  and  extracts  to  be  taken  therefrom  by  any  person 
entitled  by  law  to  inspect  the  same,  or  take  extracts  therefrom;  or, 

5.  If  a  notice  of  an  application  for  an  injunction  affecting  the  property  or  business 
of  such  joint-stock  association  or  corporation  is  served  upon  him,  omits  to  disclose  the 
fact  of  such  service  and  the  time  and  place  of  such  application  to  the  other  directors, 
officers  and  managers  thereof;  or, 

6.  Refuses  or  neglects  to  make  any  report  or  statement  lawfully  required  by  a 
public  oflacer, 

Is  guilty  of  a  misdemeanor. 

Penal   Law.     S   1200.      Rebates. 

Any  person  knowingly  receiving  any  rebate  or  allowance  or  deduction 
from  any  premium,  or  any  valuable  thing,  special  favor  or  advantage  whatever, 
as  an  inducement  to  take  any  policy  of  life  insurance,  not  specified  in  the  policy  is 
guilty  of  a  misdemeanor.  No  person  shall  be  excused  from  attending  and  testifying, 
or  producing  any  books,  papers  or  other  documents  before  any  court  or  magistrate, 
upon  any  investigation,  proceeding  or  trial,  for  a  violation  of  any  of  the  provisions  of 
this  section,  upon  the  ground  or  for  the  reason  that  the  testimony  or  evidence,  docu- 
mentary or  otherwise,  required  of  him  may  tend  to  convict  him  of  a  crime  or  to  subject 
him  to  a  penalty  or  forfeiture;  but  no  person  shall  be  prosecuted  or  subjected  to  any 
penalty  or  forfeiture  for  or  on  account  of  any  transaction,  matter  or  thing  concerning 
which  he  m'ay  so  testify  or  produce  evidence,  documentary  or  otherwise,  and  no  testi- 
mony so  given  or  produced  shall  be  received  against  him  upon  any  criminal  investiga- 
tion or  proceeding. 

Penal   Law.     S   1627.     Contradictory  statements  under  oath. 

In  any  prosecution  for  perjury  the  falsity  of  the  testimony  or  statement  set  forth 
in  the  indictment  shall  be  presumptively  established  by  proof  that  the  defendant  has 
testified,  declared,  deposed  or  certified  under  oath  to  the  contrary  thereof  in  any  other 
written  testimony,  declaration,  deposition,  certificate,  affidavit  or  other  writing  by 
him  subscribed. 

From  the  Tax  Law.     S   187.      Franchise  Tax  on   Insurance  Corporations. 

An  annual  State  tax  for  the  privilege  of  exercising  corporate  franchises  or  for 
carrying  on  business  in  their  corporate  or  organized  capacity  within  this  State  equal 
to  one  per  centum  on  the  gross  amount  of  premiums  received  during  the  preceding 
calendar  year  for  business  done  at  any  time  in  this  State,  which  gross  amount  of  pre- 
miums shall  include  all  premiums  received  during  such  preceding  calendar  year  on  all 
policies,  certificates,  renewals,  policies  subsequently  canceled,  insurance  and  reinsur- 
ance during  such  preceding  calendar  year,  and  all  premiums  that  are  received  during 
such  preceding  calendar  year  on  all  policies,  certificates,  renewals,  policies  subsequently 
canceled,  insurance  and  reinsurance  executed,  issued  or  delivered  in  all  years  prior  to  such 
preceding  calendar  year,  whether  such  premiums  were  in  the  form  of  money,  notes, 
credits,  or  any  other  substitute  for  money,  shall  be  paid  annually  into  the  treasury  of 


134  Studies  iu  Practical  Life  Insurance 

the  State,  in  the  year  nineteen  hundred  and  five  on  or  before  July  first,  and  in  all  subse 
quent  years,  on  or  before  the  first  day  of  June  by  the  following  corporations: 

1.  Every  domestic  insurance  corporation,  incorporated,  organized  or  formed 
under,  by,  or  pursuant  to  a  general  or  special  law. 

2.  Every  insurance  corporation,  incorporated,  organized  or  formed  under,  by, 
or  pursuant  to  the  laws  of  any  other  State  of  the  United  States,  and  doing  business  in 
this  State,  except  a  corporation  doing  a  fire  insurance  business  or  a  marine  insurance 
business. 

3.  Every  insurance  corporation,  incorporated,  organized  or  formed  under,  by,  or 
pursuant  to  the  laws  of  any  State  without  the  United  States,  or  of  any  foreign  country, 
except  such  a  corporation  doing  a  life,  health  or  casualty  insurance  business,  and  doing 
business  in  this  State;  but  the  tax  on  gross  premiums  of  a  corporation  so  incorporated, 
organized  or  formed  and  doing  a  fire  or  marine  insurance  business  within  the  State 
shall  be  equal  to  five-tenths  of  one  per  centum.  This  section  does  not  apply  to  a  fra- 
ternal beneficiary  society,  order  or  association,  a  corporation  for  the  insurance  of 
domestic  animals,  a  town  or  county  cooperative  insurance  corporation,  nor  to  any 
corporation  subject  to  the  supervision  of  or  required  by  or  in  pursuance  of  law  to  report 
to  the  superintendent  of  banks;  but  this  section  does  apply  to  an  individual,  or  part- 
nership, or  association  of  underwriters  known  as  Lloyds  in  so  far  as  corporations  doing 
the  same  kind  of  insurance  business  are  subject  to  its  provisions.  The  taxes  imposed 
by  this  section  shall  be  in  addition  to  all  other  fees,  licenses  or  taxes  imposed  by  this 
or  any  other  law,  except  that  in  assessing  taxes  under  the  reciprocal  provisions  of 
section  thirty-four  of  the  Insurance  Law,  credit  shall  be  allowed  for  any  taxes  paid 
under  this  section.  The  term  insurance  corporations  as  used  in  this  article  shall 
include  a  corporation,  association,  joint  stock  company  or  association,  person,  society, 
aggregation  or  partnership  by  whatever  name  known  doing  an  insurance  business  in 
this  State.  (Thus  amended  by  L.  1897,  chap.  494,  L.  1901,  chap.  118,  and  L.  1905. 
chap.  94.) 


FROM  THE  INSURANCE  LAW  OF  MASSACHUSETTS. 

Section  75.  On  and  after  January  first,  nineteen  hundred  and  eight,  no  policy  of 
life  or  endowment  insurance  shall  be  issued  or  delivered  in  this  commonwealth  until  a 
copy  of  the  form  thereof  has  been  filed  at  least  thirty  days  with  the  insurance  commis- 
sioner; nor  if  the  insurance  commissioner  notifies  the  company  in  writing  within  said 
thirty  days  that  in  his  opinion  the  form  of  said  policy  does  not  comply  with  the  require- 
ments of  the  laws  of  this  commonwealth,  specifying  his  reasons  for  his  opinion:  pro- 
vided that  this  action  of  the  insurance  commissioner  shall  be  subject  to  review  by  the 
supreme  court  of  this  commonwealth;  nor  shall  such  policy,  except  policies  of  industrial 
insurance  where  the  premiums  are  payable  monthly  or  oftener,  be  so  issued  or  delivered 
unless  it  contains  in  substance  the  following  provisions: 

1  A  provision  that  the  insured  is  entitled  to  a  grace  of  thirty  days  within  which 
the  pavment  of  any  promijim  after  the  first  year  may  be  made,  subject  at  the  option  of 
the  company  to  an  interest  charge  not  in  excess  of  six  per  cent,  per  annum  for  the 
number  of  days  of  grace  elapsing  before  the  payment  of  the  premium,  during  which 
period  of  grace  the  policy  shall  continue  in  full  force,  l)ut  in  case  the  policy  becomes  a 
claim  during  the  said  period  of  grace  before  the  overdue  premium  or  the  deferred  pre- 
miums of  the  current  policy  year  if  any  are  paid,  the  amount  of  such  premiums  with 
interest  on  any  overdue  premium  may  be  taken  from  the  face  of  the  policy  in  settlement. 

2.  A  provision  that  the  policy  shall  be  incontestable  after  two  years  from  its  date 
of  issue  except  for  non-payment  of  premiums  and  for  engaging  in  military  or  naval 
service  in  time  of  war  without  the  consent  in  writing  of  an  executive  officer  of  the 
Company. 

2.  A  provision  that  the  policy  and  the  application  therefor  shall  constitute  the 
entire  contract  between  the  parties  and  that  all  statements  made  by  the  insured  r'^^U, 
in  the  absence  of  fraud,  be  deemed  representations  and  not  warranties  and  that  no  -'ch 
statement  shall  be  used  in  defence  to  a  claim  under  the  policy  unless  it  is  contain?'  in 
a  written  applicntion  and  a  copy  of  such  application  shall  be  endorsed  upon  or  attached 
to  the  policy  when  issued. 

4.  A  provision  that  if  the  age  of  the  insured  has  been  understated  the  amount 
payable  under  the  policy  shall  be  such  as  the  premium  would  have  purchased  at  the 
correct  age. 

.5  A  provision  that  the  policy  shall  participate  in  the  surplus  of  the  company 
annually,  beginning  not  later  than  the  end  of  the  third  policy  year. 


Studies  in  Practical  Life  Insurance  1:55 

6.  A  provision  specifying  the  options  to  which  tlic  policy-holder  is  entitled  in  the 
event  of  default  in  a  premium  payment  after  three  full  annual  premiums  shall  have 
been  paid. 

7.  A  provision  that  not  later  than  the  third  anniversary  of  the  policy  the  holder 
of  the  policy  shall,  upon  a  proper  assignment  thereof  to  the  company,  be  entitled  to 
borrow  of  the  company  on  the  sole  security  of  the  policy  a  sum  not  more  than  ninety- 
five  per  cent,  of  the  cash  surrender  value  thereof,  less  any  indebtedness  to  the  company, 
at  a  rate  of  interest  not  exceeding  six  per  cent.  Said  provision  shall  include  such  other 
conditions  as,  in  conformity  to  the  laws  of  Massachusetts,  the  company  will  impose 
when  the  application  for  the  loan  is  made. 

8.  A  table  showing  in  figures  the  loan  values,  if  any,  and  the  options  available 
under  the  policy  each  year  upon  default  in  premium  payments,  during  at  least  twenty 
years  of  the  policy,  beginning  with  the  year  in  which  such  values  and  options  first 
become  available. 

9.  In  case  the  proceeds  of  a  policy  aro  payable  in  instalments  or  as  an  annuity,  a 
table  showing  the  amounts  of  the  instalment  and  annuity  payments. 

10.  A  provision  that  the  holder  of  a  policy  shall  be  entitled  to  have  the  policy 
reinstated  at  any  time  within  three  years  from  the  date  of  default  unless  the  cash  value 
has  been  duly  paid  or  the  extension  period  expired,  upon  the  production  of  evidence  of 
insurability  s:itisfactory  to  the  company  and  the  payment  of  all  overdue  premiums  and 
any  other  indebtedness  to  the  company  upon  said  policy  with  interest  at  the  rate  of  not 
exceeding  six  per  cent,  per  annum. 

Any  of  the  foregoing  provisions  or  portions  thereof  not  applicable  to  single  pre- 
mium or  non-participating  or  term  policies  shall  to  that  extent  not  be  incorporated 
therein,  and  paragraph  seven  shall  not  apply  to  foreign  companies. 


POSTSCRIPT. 

Amendments  to  Insurance  Law,  State  of  New  York,  in  1911: 

Section   16,  amended  to  make  it  lawful   for  a  domestic  life  insurance   company  to 
purchase  and  hold  its  own  capital  stock. 
Section  22,  amended  to  read  as  follows: 

§  22.  Reinsurance.  Every  insurance  corporation  doing  business  in  ihis  state  may 
reinsure  the  whole  or  any  part  of  any  policy  obligation  in  any  other  insurance  corpora- 
tion; provided  that  if  any  domestic  insurance  corporation,  other  than  a  life  insurance 
corporation,  shall  reinsure  or  determine  to  reinsure  substantially  all  its  risks,  such 
reinsurance  shall  be  submitted  in  advance  to,  and  have  the  approval  of,  the  superin- 
tendent, of  insurance,  and  provided,  further,  that  no  domestic  life  insurance  company 
shall  reinsure  its  whole  risk  on  any  individual  life  except  by  permission  of  the  superin- 
tendent of  insurance,  but  may  reinsure  any  portion  of  an  individual  risk  and  receive 
credit  for  the  reserve  on  any  policy  covering  a  risk  reinsured  if  the  reinsuring  corpora- 
tion is  authorized  to  transact  business  in  this  state,  and  may  also  receive  credit  for 
taxes  on  the  premiums  paid  on  any  such  policy.  Nothing  in  this  chapter  contained  shall 
be  construed  as  permitting  the  reinsurance  of  a  life  insurance  corporation  having  over 
two  hundred  and  fifty  million  dollars  of  insurance  outstanding  and  in  force.  When  a 
reinsurance  agreement  is  made  between  other  than  life  insurance  corporations,  the 
parties  to  such  agreement  shall,  upon  the  policies  involved,  compute  their  unearned 
premium  funds  as  follows:  The  reinsuring  or  ceding  corporation  shall,  upon  the  por- 
tion of  its  liability  not  reinsured,  maintain  a  reserve  to  be  computed  in  accordance  with 
section  one  himdred  and  eighteen  of  the  insurance  law;  the  corporation  assuming  lia- 
bility by  reinsurance  from  the  corporation  issuing  the  original  policy  shall  maintain  a 
reserve  equal  to  that  which  the  reinsuring  corporation  would  have  been  required  to 
maintain  upon  the  amount  reinsured  had  it  retained  the  liability  ceded  by  it.  No  credit 
of  any  kind  shall  be  allowed  or  given,  either  as  a  reduction  of  taxes  or  liabilities,  to  any 
corporation  transacting  business  in  this  state,  for  reinsurance  made  in  corporations  not 
authorized  to  issue  policies  in  this  state.  The  superintendent  of  insurance  shall  require 
schedules  of  reinsurance  to  be  filed  by  each  corporation  at  the  time  of  making  its  annual 
report  to  the  department. 

Section  96,  amended  by  inserting  the  words  "policies  of  reinsurance  and"  after  the 
words  "insurance  issued",  in  line  2,  page  128  of  this  book. 

Section  101,  amended  by  adding  the  words — "The  provisions  of  this  section  shall  not 
apply  to  policies  of  reinsurance." 


136  Studies  lit  Pidrficdl  Life  Insuiance 


ITEMS  FROM   XEW-VOHK  LIFE'S  AXXUAL  REPORT  FOR  190S. 


I.— CAPITAL    STOCK. 

1.  Amount  of  Capital  paid  up  in  cash 0 

2.  Amount  of  ledger  Assets   (as  per  balance),  December 

ol,   of   previous  year $503,681,718.38 

3.  crease  of  Capital  during  the  year 0 

4.  Extended    at $o03,t5Sl,718.38 

II.— INCOME. 

5.  First  year's  premiums  on  original  policies  without  de- 

duction for  commissions  or  other  expenses,  less  $    0  |. 

for  first  year's  re-insurance 

6.  Surrender  values  applied  to  pay  first  year's  premiums. 

7.  Total  first  year's  premiums  on  original  policies. 

8.  Dividends   applied   to   purchase   paid-up   additions   and 

annuities     

9.  Surrender  values  applied  to  purchase  paid-up  insurance 

and   annuities    

10.  Consideration  for  original  annuities  involving  life  con- 

tingencies       436,221.51 

11.  Consideration    for   supplementary    contracts    involving 

life    contingencies    48,821.00 


$5,424,856.30 
0 

$5,424,856.35 

479,212.80 

0 

12.  Total  new  premiums   6,389,111.66 

13.  Renewal  premiums  (in  addition  to  items  14,  15  and  16) 

without    deduction    for    commissions    or    other    ex- 
penses, less  $125,393.77  for  re-insurance  on  renewals,  $71,331,005.25 

14.  Dividends  applied  to  pay  renewal  premiums 699,996.44 

15.  Surrender  values  applied  to  pay  renewal  premiums.  . . .  16,611.55 

16.  Renewal  premiums  for  deferred  annuities 22,200.40 


17.  Total   renewal   premiums 72,069,813.64 


18.  Total  premium  income   [f^7$78,458,925.30 

19.  (A)   Consideration    for    supplementary    contracts    not   involving  life 

contingencies     272.St54.7S 

20.  Dividends  left  with  the  Company  to  accumulate  at  interest     1,258.65 

21.  Ledger  Assets,  other  than  premiums,  received  from  other  companies 

for  assuming  their  risks   0 

22.  Gross  interest  on  mortgage  loans $2,363,915.99 

23.  Gross  interest  on  collateral  loans  ])er  Sched.  C 34,861.11 

24.  Gross  interest  on  bonds,  less  $192,123.19  accrued  inter- 

est on  bonds  acquired  during  1908,  per  Schedule  D. .  15,238,937.53 

25.  Gross  interest  on  premium  notes,  policy  loans  or  liens.  1,414,464.94 

26.  Gross  interest  on  deposits  in  trust  companies  and  banks  264,222.12 

27.  Gross  interest  on  other  debts  due  the  Company 2,3784  t 

28.  Gross  Discount  on  claims  paid  in  advance 667.18 

29.  Gross  Rent  from  Company's  property,  including  $267,- 

845.22  for  Company's  occupancy  of  its  own  buildings 

per   Schedule    A J  ,032.739.55 


30.  Total  gross  Interest  and   rents 23,352,186.86 

31.  Fi-om  other  sources,  (give  items  and  amounts): 

32.  Commissions  advanced  in  previous  years  now  repaid..  $50,346.35 

33.  Policy    Fees    . 30,539,29 

34.  Award  from  City  of  New  York  for  damages     35,125.00 

35.  Doubtful  debts  recovered    10,713.75 


126,724.39 


Studies  ut   Pidcticiil  Life  I itsu ranee  VM 

37.  From  agents'  balances  previously  charged  olT n 

38.  Gross  Profit  on  sale  o'r  maturity  of  ledger  assets,  viz.: 

(a)  Real  estate  per  Schedule  A $8,:]7r).7s 

(b)  Bonds   per   Schedule   D 19,154.35 

(c)  Stocks  per  Schedule  D 0 


39.    Gross  increase  by  adjustment  in  book  value  of  led.i^er 
assets,  viz.: 

(a)  Real  estate  per  Schedule  A 0 

(b)  Bonds   per   Schedule   D $196,414.18 

(c)  Stocks   per  Schedule  D 0 


40.  Total     Income     $102,435,994.29 


-DISBURSEMENTS. 

1.  (a)   For    death    claims    (less    .?10,193.29    re-insurance),  . 

$21,096,339.09;    additions,   $1,034,951.68 $22,131,290.77 

2.  (at   For  matured  endowments   (less     0     re-insurance), 

$6,304,539.45;    additions,    $155,981.12 6,460,520.57-  / 

3.  Net  amount  paid  for  losses  and   matured  endow- 

ments        $28,591,811.34             V^ 

4.  For  annuities  involving  life  contingencies •■  1,739,250.24 

5.  Premium  notes,  and  liens  voided  by  lapse •.  0 

6.  Surrender  values  paid  in  cash  or  applied  in  liquidation 

cf  loans  or  notes 12,801,190.82       '       -^ 

7.  Surrender  values  applied   to  pay  new   premiums  i(see 

Income  No. '6)  $-  0     ;  -to  pay  renewal  premiuiips  (s^e 
-^        Income   No.    15)    $16,611.55 "■^-16,611.55 

8.  Surrender   values   applied    to    purchase    paid-up   insur- 

ance and  annuities  (see  Income  No.  9) 0 

9.  Dividends  paid  to  policy-holders  in  cash  or  applied  in 

liquidation  of  loans  cr  notes 4,861,926.56  — ^ 

10.  Dividends  applied  to  pay  renewal   premiums    (see  In-  * 

come  No.  14 )    699,996.44 

11.  Dividends   applied   to   purchase   paid-up  additions   and 

annuities   (see  Income  No.  8) 479,212.80 

12.  Dividends  left  with  the  Company  to  accumulate  at  in- 

terest  (see  Income  No.   20  ) 1,258.65 

13.  (Total   paid   policy-holders,  $49,191,258.40.)  /— 

14.  E.xpense    of    investigation    and    settlement    of    policy- 

claims,  including  $22,811.16  for  legal  expense   28,994.02        y^. 

15.  Paid  fcr  claims  on  supplementary  contracts  not  involv- 

ing life  contingencies  154,801.80 

16.  Dividends  held  on  deposit  surrendered  during  the  year 

$     0     ;   Interest  thereon  $     0     0 

17.  Paid  stockholders  for  interest  or  dividends 0 

18.  Commissions  to  agents    (less  commission  on  re-insur- 

ance); first  year's  premiums,  $2,434,531.10;  renewal 
premiums,  $987,740.58;  annuities  (original),  $12,960.- 
83,    (renewal),    $17.19 3,435,249.70  ^^ — 

19.  Commuted  renewal  commissions 82,746.41 

20.  Salaries  and  allowances  for  agencies,  including  mana- 

gers, agents  and  clerks   1,630,045.04  — t 

21.  Agency   supervffeion,    traveling,   and    all    other   agency 

expenses    392.222.27 

22.  Medical    examiners'    fees,    $238,007.64;     inspection    of 

risks,   $62,690.01    

23.  Salaries  and  all  other  compensation  of  officers,  direc- 

tors, trustees  and  Home  Office  employees 

24.  Rent,   including   $267,845.22    for   Company's   occupancy 

of  its  own  buildings,  less  $21,276.34  received  under 

sub-lease    545.838.66 

(A)  Including  commuted  value  of  instalments  or  other  benefits  not  payable  at  the  time  of 
death  oi-  maturity  of  endowments,  such  commuted  value  being  entered  also  under  No.  1  or  2  of 
Disbursements.  "■ 

(a)  Including  commuted   value  of  supplementary   lontracts — see  J^il^ti*   <>f   Iik  nme. 


138 


Studies  ill  Pidctical  Life  Insurance 


25.  Advertising,  $tJ7,594.27;    printing  and  stationery,  $196,- 

375.34;    postage,    telegraph,    telephone    and    express, 

$210,568.22;    exchange,   $60,330.07 $534,867.90 

26.  Legal  expense  not  included  in  item  14 35,233.37 

27.  Furniture,  fixtures  and  safes 86,623.98 

28.  Repairs  and  expenses    (other  than  taxes)    on  real  es- 

tate       296,506.97 

29.  Taxes  on   real  estate 168,697.83 

30.  State  taxes  on  premiums 788,280.19 

31.  Insurance  Department  licenses  and  fees 16,849.95 

32.  All    other    licenses,    fees    and    taxes    (give    items    and 

amounts) :     Liocal  licenses  and  taxes $64,S74.45 

33.  Tax  on  policy  reserve 37,792.55 

34.  Miscellaneous   taxes    18,023.56 

35.  Income  tax  on  interest  receipts 17,639.52 

138,330.08 

36.  Other  disbursements  (give  items  and  amounts): 

37.  Commissions   advanced $7,081.93 

38.  Paid  agents  under  Nylic  contracts 494,^82.03 

39.  Restaurant,    $37,339.23;    Premiums   on  Fidelity   Bonds, 

$8,700.49;  custody  of  securities,  $14,993.07;  papers, 
books,  subscriptions,  $9,913.84;  legislative  and  de- 
partmental expenses,  $12,710.07;  Association  of  Life 
Insurance  Presidents,  not  including  amount  paid 
them  for  legislative  expenses,  $14,535.32;  expenses 
Trustees'  election,  1908,  $9,151.25;  expenses  Trus- 
tees' election,  1909,  $25,584.77;  miscellaneous  interest 
payments,  $8,378.42;  inspection  reports  not  in  con- 
nection with  new  business,  $1,502.84;  executive  com- 
mittee miscellaneous  expenses,  $168.24;  examination 
of  Company  by  New  York  State  Insurance  Depart- 
ment, $18,925.03;  miscellaneous  items  of  expense, 
$16,846.02     178,748.50 

40.  Doubtful  debts  marked  off 19,880.82 

700.593.37 

41. 

42.  « 

43.  Agents'  balances   charged   off 0 

44.  Gross  loss  on  sale  or  maturity  of  ledger  assets,  viz.: 

(a)  Real  Estate,  per  Schedule  A $180.00 

(b)  Bonds,  per  Schedule  D .  161.69 

(c)  Stocks,  per  Schedule  D . 0 

341.69 

45.  Gross  decrease  by  adjustment  in  book  value  of  ledger 

assets,  viz.: 

(a)  Real  Estate,  per  Schedule  A $4,394.80  . 

(b)  Bonds,  per  Schedule  D 237,763.09  ' 

(c)  Stocks,  per  Schedule  D 0 

242.157.89 

46.  Total    Disbursements    $60,172,009.25 

47.  Balance    $545,945,703.42 

IV.— LEDGER   ASSETS. 

1.  Book  value  of  Real  Estate,  per  Schedule  A $12,645,993.97 

2.  Mortgage  Loans  on  Real  Estate,  per  Schedule  B,  first 

liens,  $58,706,413.36  (other  than  first  liens,  $     0     ) .  .       58.706,413.36 

3.  Loans  secured  by  pledge  of  Bonds,  per  Schedule  C. . . .  500,000.00 

4.  Loans  made  to  policy-holders  on  this  Company's  poli- 

cies assigned  as  collateral 82,631.137.09 

5.  Premium  notes  on  policies  in  force,  of  which  $     0     is 

for  first  year's  premiums 4,685,504.35 

6.  Book  Value  of  Bonds,  $377,518,182.19  and  sto<-ks,  $     0     , 

per   Schedule   I) 377,518,182.19 

7.  Cash  in  Company's  ofi^ice 10,085.54 

8.  Deposits  in  trust  companies  and  banks,  not  on  interest  1.579,417.61 

9.  Deposits  in  trust  companies  and  banks,  on  interest  7..>53,918.45 


■studies  in  Practical  Lifr  ln,suraucr  ]'<\* 

10.  Bills    receivable,    $       0       ;    agents'    balances,    (debit, 

$     0    ,  credit,   $     0     );    net,   $     0     ;    Branch   Office 
balances,   debit,   $134,341.02,   credit,   $133,049.32:    net 

$1.291.70 ,?V-?1-I!; 

11.  Cash  in  Company's  Branch  Offices J  i..,<oj.id 

12.  Total   Ledger  Assets,  as  per  balance  on  page  preceding $545,945,703.42 


$485,833. r 


>0,00'0.0'0 


34,042.79 


NON-LEDGER  ASSETS. 

13.  Interest   due,    $112,871.67   and   accrued,    .|372,9(51.50   on 

Mortgages,  per  Schedule  B 

14.  Interest  due,  $144,630.69  and  accrued,  $5,149,716.57  on 

Bonds,  per  Schedule  D,  Part  1 o,294,35o.26 

15.  Interest  due,  $     0     and  accrued,  $20,000  on  Collateral 

Loans,  per  Schedule  C,  Part  1 

16.  Interest  due,  $     0     and  accrued,  $211,997.20  on  Premi- 

um Notes,  Policy  Loans  or  Liens 2]l,9J..-(i 

17.  Interest  due,   $     0     and  accrued,   $34,042.79   on  other 

Assets      • 

18.  Rents  due, '  $6,415.10  and  accrued,  $10,205.32  on  Com- 

pany's property  or  lease 16,620.4- 

19.  Total  interest  and  rents  due  and  accrued $6,062,846.84 

20.  Market  value  of  Real  Estate,  over  book  value,  per  Schedule  A .  0 

21.  Market  value  (not  including  interest  in  item  14)  of  Bonds  and  stocks 

over  book  value,  per  Schedule  D •  •  •  •  •  ^ 

22.  Due  from  other  Companies  for  losses  or  claims  on  policies  ot   this 

Company  reinsured   

(1)  <:^i 

New  Business.       Renewals 

23.  Gross  premiums  due  and  unreported  on  ^      ^„„.„,^ 

policies  in  force  Dec.  31,1908 $83,118.49      $4,726,256.10 

24.  Gross  deferred  premiums  on  policies  in  .„..-.r.^r.^ 

force  Dec.  31,  1908 330,770.00        4,745,179.00 

25.  Totals     $413,888.49      $9,471,435.10 

26".    Deduct  loading,  25  per  cent 103,472.12        2,367,858.78 

27.    Net  amount  of  uncollected  and  deferred 
premiums    


$310,416.37       $7,103,576.32 
$7,413,992.69 


28.  All  other  Assets  (give  items  and  amounts) 

29.  \ 

30.  \ 

31.  \ 

32.  \ 


33.  Gross  Assets    

DEDUCT   ASSETS    NOT   ADMITTED. 

34.  Company's  stock:  owned,     0     ;  loans  on.     0     $  0 

35.  Supplies,  stationery,  printed  matter,  $     0     ;  furniture, 

fixtures  and  safes,  $     0     '^' 

36.  Commuted  commissions,  $     0     ;  agents'  debit  balances, 

$     0      0 

37.  Cash  advanced  to  or  in  the  hands  of  officers  or  agents.  0 

38.  Loans  on  personal  security,  endorsed  or  not,  $     0     ; 

bills   receivable,   $     0     .•  •  •  ■  " 

39.  Premium  notes  and  loans  on  policies  and  net  premiums 

in  item  27  in  excess  of  the  net  value  of  their  policies  0 

40.  Book  value  of  Ledger  Assets  over  market  value,  viz.: 

on  Bonds "'^^o^'l^Ml 

41.  Branch  Office  debit  balances •  • 134,341.02 

42. 

43.  Admitted  Assets 


$559,422,542.95 


2,135,872.19 


$557,286,670.76 


140  Studies  hi  Pracficdl  Life  Insuranct 

v.— LIABILITIES. 

Net  present  value  of  all  the  outstanding  policies  in  force  on  the  31st  day  of  December, 
1908,  as  computed  by  the  Insurance  Department  of  the  State  of  New  York  on  the 
following  tables  of  mortality  and  rates  of  interest,  viz.: 

1.  Actuaries'  table  at  4  per  cent,  on  issues  prior  to  1901, 

except  those  bearing  Z^A  guarantees $191). 015,041. Oil 

Same  for  reversionary  additions 0 

$19y,01.5,041.00 

2.  American   Experience   table   at  3    per  cent,   on    insur- 


ances bearing  3%  guarantees   $173,914,429.00 

Same  for  reversionary  additions 69,3.50.00 


American  Experience  table  at  S^o^   on  issues  cf  1901 

and  since,  except  those  bearing  Z%  guarantees $3,898,763.00 

Same  for  reversionary  additions 2,401,884.00 


Other  tables  and  rates,  viz.: 

Double  American  Experience  table  at  3'y  on  tropical 

insurances  and  those  on  impaired  lives $33,905,246.00 

Same  for  reversionary  additions 133,137.00 


Sesqui  American  Experience  table  at  3  per  cent,  on 
semi-tropical  insurances  and  those  on  partially  im- 
paired  lives    $30,282,919.00 

Same  for  reversionary  additions 20.283  00 


173,983,785.00 


6,300,647.00 


34,0'38,383.00 


30.303,202.00 


Net  present  value  of  annuities  (including  those  in  re- 
duction of  premiums).  Give  tables  and  rates  of  in- 
terest, viz  : 

Actuaries'  table  at  4  per  cent,  on  issues  prior  to 

1901     $8,018,394.00 

American  Experience  table  at  3  per  cent,  on  issues 

of  1901  to  1906,  inclusive 6,653.550.00 

WcClintock's  Annuity  table,  3Vi  per  cent,  on  issues 

of  1907-1908    1 ,039.078.110 


15.711,022.00 


Total     $450,352,080.00 

Deduct  net  value  of  risks  of  this  Company  reinsured  in  other  solvent 

companies     142,669.00 


$459,209,411.00 
Reserve  to  provide  for  health  and  accident  benefits  contained  in  life 

policies     0 


8.  Net  Reserve   $459,209,411.00 

9.  Present   value  of  amounts   not   yet  due  on   supplementary   contracts 

not  involving  life  contingencies,  computed  by  the  Company $2,319,830.24 

10.  Liability  on  policies  canceled  and  not  included  in  "Net  Reserve"  upon 

which  a  surrender  value  may  be  demanded 267,687.36 

11.  Claims  for  Death  Losses  due  and  uni)aid  0 

12.  C'hiims  for  Death  Losses  in  process  of  adjustment  or 

adjusted  and  not  due $7l>5, 446.1:1 

13.  Claims  for  Death  Losses  which  have  been  reported  and 

no  proofs  received  1.888,427.63 

14.  Claims  for  Matured  Endowments  due  and  unpaid 328,881.10 

15.  Claims  for  Dv^ath  Losses  and  other  Policy  Claims  re- 

sisted by  I  he  Company  231,780.62 

16.  Due  and  unpaid  on  Annuity  Claims,  involving  life  con- 

tin,t;cncies     141.435.83 


17.  Total  Policy  Claims   $3,355,971.31 

18.  Due  and  unpaid  on  supplementary  contracts  not  involving  life  con- 

tingencies      $199.:;.^ 

19.  Dividends    left    with    the    Company    to    accumulate    at    interest, 

$1,258.65,  and  accrued  interest  thereon  $18.87 1.277.;T2 


Stitdirs   in   Pidcticdl   Life  In.surcuicc  141 

20.  i  reiniums  paid  in  advance,  including  surrender  values  so  applied..  $812,8S8.i:; 

21.  Unearned    interest   and    rent   paid    in   advance:      Premium    Notes, 

$86,7.32.23;  Policy  Loans,  $1,856,275.61;  Real  Estate,  $7,234.87 1,950,242.71 

22.  Commissions  due  to  agents  en  premium  notes  when  paid 48,648.60 

23.  Commissions  to  agents,  due  or  accrued •  •  .  .  10,511.22 

24.  'Cost   of   Collection"   on   uncollected    and   deferred    premiums,    in 

excess  ot  the  loading  thereon 0 

25.  Salaries,  rents,  office  expenses,  bills  and  accounts,  due  or  accrued.  161.324.86 

26.  Medical  Examiners',  Inspectors'  and  legal  fees,  due  or  accrued.  . .  .  28,825.03 

27.  State,  County  and  Municipal  taxes,  due  or  accrued 762,673.63 

28.  Advances  by  officers  or  others  on  account  cf  expenses  of  organiza- 

tion or  otherwise    (> 

29.  Borrowed  money  and  interest  tnerocn.  .  •  ■ U 

30.  Unpaid  dividends  to  stockholders 0 

31.  Dividends  or  other  profits  due  policy-holders,  including  those  con- 

tingent on  payment  of  outstanding  and  deferred  premiums 412,617.76 

32.  Dividends  declared  on  or  apportioned  to  annual   dividend   policies 

payable  to  policy-holders  during  1909,  whether  contingent  upon 

the  payment  of  renewal  premiums  or  otherwise 1,663,027.00 

33.  Dividends  declared  on  or  apportioned  to  deferred  dividend  policies 

payable  to  policy-holders  during  1909 5,937,878.16 

34.  Amounts  set  apart,  apportioned,  provisionally  ascertained,  calcu- 

lated,  declared  or  held   awaiting  apportionment  upon   deferred 

dividend  policies,  not  included  in  Item  33 67,181,561.00 

35.  Reserve   or   surplus    funds    not   otherwise    included    in   Liabilities 

(give  items  and  amounts  separately,  and  state  for  what  purpose 
each  of  said  funds  is  held),  consisting  of  additional  Reserve  on 
policies  which  the  Company  voluntarily  sets  aside  in  excess  of 
the  State's  requirements,  $3,129,402;  War  Risk  Fund,  $501,000; 
Mortality  Fluctuation  Fund,  $500,000;  Security  Fluctuation  and 
General  Contingency  Fund,  $7,945,842.84 12,076,244.84 

36. 

37. 

38. 

39.  All  othef  liabilities   (give  items  and  amounts): 

40.  Reserve  for  death-claims  not  yet  reported  at  Home  OfRce.  ......  .  500,0'O0.0O 

41.  Due  agents  under  Nylic  contracts 26,770.01 

42.  Reserve  for  Nylic  contracts •  • 557,081.0'0 

43. 

44.  Capital  Stock  0 

45.  Unassigned  funds   (surplus ) 0 

46.  Total    Liabilities    $557,286,670.76 


142  Shdlir.s  in  rractical  Life  Insurance 

ITEMS  FROM  NEW- YORK  LIFE'S  ANNUAL  REPORT  FOR  lIllO. 

I.— CAPITAL   STOCK. 

1.  Amount  of  Capital  paid  up  in  cash $  0 

2.  Amount  of  ledger  Assets  (as  per  balance),  December 

31,  of  previous  year $589,604,609.41 

3 crease  of  Capital  during  the  year ' o 

^'  Extended    at $589,604,609.4] 

II.— INCOME. 

5.  First  year's  premiums  on  original  poli- 

cies without  deduction  for  commis- 
sions or  other  expenses,  less  $  0  for 
first  year's  re-insurance $6,516,105.78 

6.  Surrender    values    applied    to    pay    first 

year's  premiums  0 

7.  Total    first    year's    premiums    on 

original  policies    6,516,105.78 

8.  Dividends   applied    to    purchase    paid-up 

additions  and  annuities   706,568.69 

9.  Surrender    values    applied    to    purchase 

paid-up  insurance  and  annuities 0 

10.  Consideration  for  original  annuities  in- 

volving life  contingencies 496,109.05 

11.  Consideration    for    supplementary    con- 

tracts involving  life  contingencies 271,155.70 

12.  Total  new   premiums 7  ggg  939  92 

13.  Renewal  premiums  (in  addition  to  items 

14,  16  and  17)   without  deduction  for 
commissions   or  other  expenses,    less 
$107,287.44  for  re-insurance  on  renew- 
, ,     ,  .^Is   70,395,669.03 

14.  Dividends   applied   to   pay   renewal   pre- 

..     _."ii""is    1,899,486.68 

15.  Dividends  applied  to  shorten  the  endow- 

ment or  premium  paying  period 0 

16.  Surrender  values  applied  to  pay  renewal 

premiums    29  775.99 

17.  Renewal   premiums   for  deferred   annui- 


ties 


38,540.46 


18.  Total  renewal  premiums 72,363,472.16 

19-  Total    premium   income 80,353,411.38 

20.  (A)   Consideration    for    supplementary    contracts    not 

involving  life  contingencies   160  060  51 

21.  Dividends    left    with    the    Company    to    accumulate    at 

interest    .    44,896.64 

22.  Ledger   assets,    other    than    premiums,    received    from 

other  companies  for  assuming  their  risks 0 

23.  Gross   interest  on    mortgage    loans,    per 

Schedule  B,  less  $     0      accrued  inter- 
est on  mortgages  acquired  during  1910        3,481,947  10 

24.  Gross   interest  on   collateral    loans,    per 

Schedule  C  0 

25.  Gross  interest  on  bonds,  less  $124,941.99 

accrued    interest    on    bonds    acquired 

during  1910,  per  Schedule  D 16,891,258.92 

26.  Gross  interest  on  premium  notes,  policy 

"oan^   or  liens 5,218,630.98 

(A)  Inolu.llng  commuted  value  of  instalments  or  other  benefits  not  payable  at  the  time 
or  death  or  maturity  of  endowments,  .such  commuted  value  being  entered  also  under  No.  1  or  2 
of  Disbursements. 


studies  in  Pidctical  Life  Insurance  143 

27.  Gross  interest  on  deposits  in  trust  com- 

panies and  banks  $276,951.35 

28.  Gross   interest  on  other  debts   due   the 

Company  (give  items  and  amounts) : 

29.  Interest  Agents'  Accounts 1,996.29 

30. 

31.  Gross  discount  on  claims  paid  in  advance  8,339.33 

32.  Gross    rent    from    Company's    property, 

including  $275,534.93  lor  Company's 
occupancy  of  its  own  buildings,  per 
Schedule   A    918,173.83 

33.  Total  gross  interest  and  rents 26,797,297.80 

34.  From    other    sources    (give    items    and 

amounts) : 

35.  Commissions  advanced  in  previous  years 

now    repaid    73,428.62 

36.  Policy  fees   37,012.43 

37.  Doubtful  debts  recovered 1,025.94 

38.  Exchange    19,164.26  130,631.2.^. 

39. 

40.  From      Agents'       balances       previously 

charged  off 0 

41.  Gross  profit  on  sale  or  maturity  of  led- 

ger assets,  viz.: 

(a)  Real  Estate,  per  Schedule  A 7,065.66 

(b)  Bonds,  per  Schedule  D 52,695.47 

(c)  Stocks,  per  Schedule  D 0  59,761.13 

42.  Gross  increase,  by  adjustment,  in  book 

value  of  ledger  assets,  viz.: 

(a)  Real  Estate,  per  Schedule  A 0 

(b)  Bonds,  per  Schedule  D  (including 
$189,535.41  for  accrual  of  dis- 
count)       440,482.93 

(c)  Stocks,  per  Schedule  D 0  440,482.93 

43.  Total    Income    $107,986,541.64 

44.  Amount   carried   forward $697,591,151.05 

III.— DISBURSEMENTS. 

1.  (a)    For   death   claims    (less    $199,485.35 

re-insurance),    $22,787,698.24;     addi- 
tions,  $938,436.29    $23,726,134.53 

2.  (a)   For  matured  endowments  (less  $     0 

re-insurance),     $6,433,670.97;      addi- 
tions, $35,159.60    $6,468,830.57 

3.  Net  amount  paid  for  losses  and  matured  endow- 

ments          $30,194,965.10 

4.  For  annuities  involving  life  contingencies 1,659,508.48 

5.  Premium   notes  and   liens   voided   by  lapse,  less   $     0 

restorations    0 

6.  Surrender  values  paid  in  cash  or  applied  in  liquidation 

of  loans  or  notes   13,054,871.09 

7.  Surrender  values  applied  to  pay  new   premiums    (see 

Income  No.  6),  $     0     ;  to  pay  renewal  premiums  (see 

Income  No.  16),  $29,775.99 29,775.99 

8.  Surrender   values    applied    to    purchase    paid-up    insur- 

.  ance  and  annuities  (see  Income  No.  9) 0 

9.  Dividends  paid  to  policy-holders  in  cash  or  applied  in 

liquidation  of  loans  or  notes 5,974,370.47 

10.  Dividends  applied  to  pay  renewal   premiums    (see  In- 

come No.  14)    1,899,486.68 

11.  Dividends   applied   to  shorten  the  endowment  or  pre- 

mium paying  period  (see  Income  No.  15) 0 

(a)  Including  commuted  vahie  of  siir>plementary  contracts — see  No.   20  of  Income. 


144  -Sfudit.s   ill   Practicdl  Life  Iiisuitincc 

12.  Dividends  applied   to  purchase   paid-up  additions  and 

annuities  (see  Income  No.  8 » $706, .568. 69 

13.  Dividends  left  with  the  Company  to  accumulate  at  in- 

terest  (see  Income  No.  21 ) 44.896.64 

14.  (Total  paid  policy-holders,  .$53,564,443.14) 

15.  Expense    of    investigation    and    settlement    of    policy 

claims  including  $32,276.02,  for  legal  expense 38,935.97 

16.  Paid  for  claims  on  supplementary  contracts  not  involv- 

ing   life   contingencies 175,078.07 

17.  Dividends   and   interest   thereon    held   on   deposit    sur- 

rendered during  the  year 3,179.13 

18.  Paid  stockholders  for  interest  or  dividends 0 

19.  Commissions  to  agents    (less  commission  on  re-insur- 

ance) : 
First   year's    premiums,    $2,915,193.71;    renewal    premi- 
ums.   .^,307,238. 62;    annuities    (original),    $22,435.54 
(renewal),   $872.85    1.24.",. 740. 72 

20.  Commuted  renewal  comniissicns    3,102.00 

21.  Compensation    of    managers    and    agents    not    paid    by 

commission  for  services  in  obtaining  new  insurance".  20,335.65 

22.  Agency  supervision  and  traveling  expenses  of  supervi- 

sors   (except   compensation   for  Home   Office   super- 
vision )    955.553.39 

23.  Branch  Office  expenses,  including  salaries  of  managers 

and  clerks  not  included  in  item  21 1,001.791.71 

24.  Medical    examiners'    fees,    $255,649.94;     inspection    of 

risks,    $65,824.33    321,474.27 

25.  Salaries  and  all  other  compensation  of  officers,  direc- 

tors, trustees  and  Home  Office  employees 1,581,628.88 

26.  Ptent,  including  $275,534.93  for  Company's  occupancy  of 

its  own  buildings,  less  $8,284.97  received  under  sub- 
lease       526.744.12 

27.  Advertising,  $66,477.34;   printing  and  stationery,  $191,- 

706.24;    postage,    telegraph,    telephone   and    express, 

$201,974.34 ;    exchange,   $     0     460.157.92 

28.  Legal  expense  not  included  in  item  15 , 14,687.99 

29.  Furniture,  fixtures  and  safes   59,452.97 

30.  Repairs  and  expenses  (other  than  taxes)  on  real  estate  217.297.90 

31.  Taxes  on  real  estate 146,491.54 

32.  Ftate  taxes  on  premiums 803. 394. 06 

33.  Insurance  Department  licenses  and  fees 14.117.26 

34.  .\ll    other    licenses,    fees    and    taxes    (give    items    and 

amounts) : 

35.  Local  licenses  and  taxes $72,384.96 

36.  Tax  on  policy  reserves,  $42,404.72;    Fed- 

eral  Income  Tax,  $106,411.02 148,815.74 

37.  :\Iiscellaneous  taxes  (including  $5,406.99 

income  tax  on  interest  receipts) 35,250.77  256.451.47 


38.  Other    disbursements    (give    items    and 

amounts) : 

39.  Paid  agents  under  Nylic  contracts $509,099.84 

40.  Doubtful  debts  marked  off 9,619.18 

41.  Premium   on    Fidelity    Bonds,    $8,771.75; 

Special  Inspection  Reports,  $4,103.29; 
Restaurant,  $43,393.85;  Custody  of  Se- 
curities, $21, .506.39;  Papers,  Books, 
Subscriptions,  etc.,  $9,337.90;  Legisla- 
tive and  Departmental  Exi)enses, 
$4.340.21 ;  Expenses  Trustees'  Election, 
1911,  $27,934.07;  Traveling  Expenses 
not  included  in  Item  22,  $15,255.95; 
Miscellaneous  Items  of  Expense, 
$l<J.T52-86     151,396.27  070.1 15.29 

42.  Commissions  paid  on  real  estate  sales..  775.00 


43.  -Miscellaneous     Interest     Pavments,     $3,085.21;     Bank 

charges,  $18,835.44   •>!  jV^O  6." 

44.  -   .   -   • 

45.  .Agents'   balances   ciiar.ged    off n 


studies  in  Praciical  Life  Lnsarancc  145 

46.  Grcss  less  en  sale  or  maturity  of  ledger 

assets,  viz.: 

(a)  Real  Estate,  per  Schedule  A $6,932.14 

(b)  Bonds,  per  Schedule  D 73,830.54 

(c)  Stocks,  per  Schedule  D 0 

(d)  Bond  and  Mortgage  per  Schedule  B  239.44  81,002.12 

47.  Gress  decrease,  by  adjustment,  in  leek 

value  of  ledger  assets,  viz.: 

(a)   Real  Estate,  per  Schedule  A 0 

(bi   Bonds,  per  Schedule  D  (including 

$276,027.55     for     amortization     of 

premiums )    $1,205,005.28 

(c)   Stocks,  per  Schedule  D 0  1,205,005.28 

48.  Total    Disburse.T.ents    $66,388,876.50 

49.  Balance    $631,202,274.55 

IV.— LEDGER   ASSETS. 

1.  Book  value  of  Real  Estate,  per  Schedule  A $11.5.j4,601.09 

2.  Mortgage  Loans  on  Real  Estate,  per  Schedule  B,  first 

liens,  $92,523,123.00;  other  than  first  liens,  $     0     ...       92,523,123.00 

3.  Loans  secured  by  pledge  of  bonds,  per  Schedule  C 200,000.00 

4.  Loans  made  to  policy-holders  on  this  Company's  poli- 

cies assigned  as  collateral 99,737,917.78 

5.  Premium  Notes  on  policies  in  force,  of  which  $     0     is 

for  first  vear's  premiums -1,-578,992.59 

6.  Book  value  of  bonds,  $413,530,908.58  and  stocks,  $     0     , 

per  Schedule  D  413,530,908.58 

7.  Cash  in  Company's  office $3,651.49 

8.  Deposits  in  trust  companies  and  banks, 

not  on  interest   1,340,273.58 

9.  Deposits  in  trust  companies  and  banks, 

on  interest   7,560,704.77        8,904,62'9.84 

10.  Bills  receivable,  $    0    ;  agents'  balances   (debit,  $    0    , 

credit,  $     0     ) ;  net,  $     0     .     Branch  Office  balances, 

debit,  $67,204.73,  credit,  $49,757.71;  net,  $17,447.02...  17.447.02 

11.  Cash  in  Company's  Branch  Offices,  $150,953.28;  Cash  in 

Transit,  $3,701.37    1.-34.654.63 

Total    Ledger  Assets,  as   per  balance  above $631,202,274.55 


12. 


NON-LEDGER    ASSETS. 


13.  Interest    due,    $15,567.50    and    accrued,    $799,396.24    en 

Mortgages,   per   Schedule   B .^814,963.74 

14.  Interest  due,  $542,394.62  and  accrued,  $5,642,617.81  en 

Bonds,  per  Schedule  D,  Part  1 6.185,012.43 

15.  Interest  due,  $     0      and  accrued,  .$244.44  on  Collateral 

Loans,  per  Schedule  C,  Part  1 244.44 

16.  Interest  due,  $     0       and  accrued,  $237,318.63  on  Pre- 
mium Notes,  Policy  Loans  or  Liens 237.318.63 

17.  Interest  due  and  accrued,  on  other  Assets  (give  items 

and  amounts)  : 

18.  Interest    due,    $13,568.40    and    accrued,    $12,698.03    on 

Bank  Balances    26.266.43 

19. 

20.  Rents    due,   $4,455.96   and    accrued,    $5,281.39   on   Com- 

pany's property  or  lease 9,737.35 

21.  Total  interest  and  rents  due  and  accrued  7,273,543.0: 

22.  Market    value   of   Real    Estate    over    Book    Value,    per 

Schedule   A    0 

23.  Market   value    (not   including    interest   in   item   14),   of 

Bonds  and  Stocks  over  book  value,  per  Schedule  D.  .  0 

24.  Due  from  other  companies  for  losses  or  claims  on  poli- 

cies of  this  Company,  reinsured 0 


146  iStudic6  ill  Vnitticul  Life  hhsuraxcc 

(1)  (2) 

New   Business.       Renewals 

25.  Gross  premiums  due  and  unreported  on 

policies   in   force   December   31,    1910 

(less  re-insurance  premiums) $80,914.22      $4,428,395.67 

26.  Gross  deferred  premiums  on  policies  in 

force  December  31,  1910  (less  re-insur- 
ance premiums)    370,404.00        4.877,031.00 

27.  Totals     $451,318.22       $9,305,426*67 

28.  Deduct  loading,  25'v    112,829.55        2,326,356.67 

29.  Net  amount  of  uncollected  and  deferred 

premiums    $338,488.67      $6,979,070.00      $7,317,558.67 

30.  All  other  Assets  (give  items  and  amounts): 

31 

32 

33 

34 

35.  Gross   Assets    $645,793,376.24 


DEDUCT    ASSETS    NOT    ADMITTED. 

36.  Company's  stock  owned,  $     0     ;  loans  on,  $     o     $  0 

37.  Supplies,  stationery,  printed  matter,  $     0     ,  furniture, 

fixtures  and  safes,  $     0     0 

38.  Commuted    commissions,    $     0     ;     agents'    debit    bal- 

ances, gross,   $     0     0 

39.  Cash  advanced  to  or  in  the  hands  of  officers  or  agents.  0 

40.  Loans  on  personal  security,  endorsed  or  not,  $     0     ; 

bill  receivable,   $     0     0 

41.  Premium    Notes    and    loans   on    policies    and    net   pre- 

miums in  item  29  in  excess  of  the  net  value  of  their 

policies    0 

42.  Book  value  of  Ledger  Assets  over  market  value,  viz., 

on    Bonds    7,S49,604.37 

43.  Branch  office  debit  balances 67,204.73 

44 7,916,809.10 

45.  Admitted  Assets   $637,876,567.14 


v.— LIABILITIES,    SURPLUS     AND     OTHER     FUNDS. 

Net  present  value  of  all  the  outstanding 
policies  in  force  on  the  31st  day  of  De- 
cember, 1910,  as  computed  by  the  Insur- 
ance Department  of  the  State  of  New 
York  on  the  following  tables  of  mortal- 
ity and  rates  of  interest,  viz.: 

1.    Actuaries'  table  at     per  cent,  on    0 

Same  for  reversionary  additions...  0  0 


American  Experience  table  at  3  per  cent. 
On  general  risks:  all  policies  issued 
1898  and  since;  all  insurances  bearing 
3  per  cent,  guarantees;  Free  Tontine 
Ordinary  Life  policies  issued  1892  and 
since;  Accumulation  policies  having 
completed  their  Accumulation  period; 
all  Annual  Dividend  policies;  all  paid- 
up    Term    Extension    insurance,    and 

Premium  Return  additions $332,884,598 

Same  for  reversionary  additions...  2,939,784        $3;J5,824.382 


studies  in  Practical  Life  Insurance  147 


3.    American   Experience   table   at  3Vi    per 
cent,   on  all   other  insurances   except 

those  specified  under  4 $101,771,822 

Same  for  reversionary  additions...  0  101,771,822 

4.    Other  tables  and  rates,  viz.: 

Double     American     Experience     table 
at  3  per  cent,  on  tropical  insurances 

and  those  on  impaired  lives $38,067,75& 

Same  for  reversionary  additions.  115,844  38,183,602 


Sesqui  American  Experience  table  at 
3  per  cent,  on  semi-tropical  insur- 
ances and  those  on  partially  im- 
paired lives    $36,590,319 

Same  for  reversionary  additions.  48,133  36,638,452 


Reserve  to  cover  contingent  waiver  of 
premium  contained  in  certain  poli- 
cies, based  upon  Fraternal  experi- 
ence and  3% 3,820 

Net  present  value  of  annuities  (includ- 
ing those  in  reduction  of  premiums). 
Give  tables  and  rates  of  Interest, 
viz.: 

McClintock's    Annuity   table,    31/2    per 

cent,  on  issues  prior  to  1909 15,020,441 

McClintock's  Annuity  table,  3  per 
cent,  on  issues  of  1909  and  subse- 
quent      916,366  15,936,807 


Total     $528,358,885 

6.  Deduct  net  value  of  risks  of  this  Company  re-insured 

in  other  solvent  companies 136,756 

$528,222,129 

7.  Reserve   to   provide   for  health   and   accident   benefits 

contained  in  life  policies  0 

8.  Net  Reserve   (Paid-for  basis) $528,222,129.00 

9.  Present  value  of  amounts  not  yet  due  on  supplementary  contracts  not 

involving  life  contingencies,  computed  by  the  Company 2,460,909.25 

10.  Liability  on  policies  canceled  and  not  included  in  "net  reserve"  upon 

which  a  surrender  value  may  be  demanded 292,735.33 

11.  Claims  for  Death-Losses  due  and  unpaid 0 

12.  Claims  for  Death-Losses  in  process  or  adjustment,  or 

adjusted  and  not  due   $981,038.38 

13.  Claims  for  Death-Losses  which  have  been  reported  and 

no  proofs  received  1,865,704.03 

14.  Claims  for  Matured  Endowments  due  and  unpaid 345,585.03 

15.  Claims  for  Death-Losses  and  other  Policy  Claims   re- 

sisted by  the  Company 278,395.89 

16.  Due  and  unpaid  on  Annuity  Claims  involving  life  con- 

tingencies       136,960.23 


840.07 


17.  Total   Policy    Claims 3,607,683.56 

18.  Due  and  unpaid  on  supplementary  contracts  not  involving  life  contin- 

gencies     

19.  Dividends  left  with  the  Company  to  accumulate  at  interest,  and  ac- 

crued   interest   thereon 61,160.65 

20.  Premiums  paid  in  advance,  including  surrender  values  so  applied 732,075.74 

21.  Unearned  interest  and  rent  paid  in  advance 2,355.148.75 

22.  Commissions  due  to  agents  on  premium  notes  when  paid 46,792.-50 

23.  Commissions  to  agents,  due  or  accrued 10,611.89 

24.  'Cost  of  Collection"  on  uncollected  and  deferred  premiums,  in  excess 

of  the  loading  thereon ^     ^ 

25.  Salaries,  rents,  office  expenses,  bills  and  accounts  due  or  accrued 71,198.81 

26.  Medical  Examiners'  fees  and  salaries.  $16,587.43,  and  legal  fees  and 

salaries,  $10,066.35 ;   due  or  accrued 26.6o3.78 


148  Sft((]ics  ill  Pfdcticdl  Life  htsuiancc 

27.  State.  County  and  Municipal  taxes  due  or  accrued $906,465.93 

28.  Advances  by  officers  or  others  on  account  of  expenses  of  organization 

or  otherwise    0 

29.  Borrowed  money.  %     0     ,  and  interest  thereon,  %     0     0 

30.  Unpaid  dividends  to  stockholders 0 

31.  Dividends  or  other  profits  due  policy-holders,  including  those  contin- 

gent on  payment  of  outstanding  and  deferred  premiums 798.696.34 

32.  Dividends  declared  on  or  apportioned  to  annual  dividend  policies  pay- 

able  to   policy-holders   during    1911.    whether    contingent    upon    the 

payment  of  renewal  premiums  or  otherwise 3.390,239.00 

33.  Dividends   declared   on   or   apportioned    to   deferred    dividend    policies 

payable  to  policy-holders  during  1911 0.720,377.37 

34.  Amounts  set  apart,  apportioned,  provisionally  ascertained,  calculated. 

declared    or   held    awaiting   apportionment   upon    deferred    dividend 

policies,  not  included  in  Item  33 77.545,164.00 

35.  Reserve,  special  or  surplus  funds  not  included  above  (give  items  and 

amounts  separately,  and  state  for  what  purpose  each  of  said  funds 
is  held),  War  risk  fund,  $501,395;  Security  Fluctuation  and  General 
Contingency  fund.  $8,438,334.30;  Mortality  Fluctuation  Fund. 
$500,000;  Annual  Dividend  Equalization  Funds,  $387,532 9.827.261  30 

36 

37 

38 

39.  All  other  liabilities  (give  items  and  amounts): 

40.  Due  agents  under  Nylic  contracts 1,641.87 

41.  Reserve  for  Nylic  contracts 1 .293,782.00 

42.  Reserve  for  death  claims  not  yet  reported  to  Home  Oflice 500.000.00 

43.  Reserve  for  unclaimed  receipts 5.000.00 

44.  Capital   Stock    0 

45.  Unassigned   funds    (surplus ) 0 

46.  Total    $637,876,567.14 


OVERDU_ 


LD  21-100m-7.'33 


226104 


yO  05534 


r^  ti. 


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»-/v^ 


